PhoenixPartners provides management consulting services to government and corporate clients. Phoenix has two support departments—administrative services(AS)...
PhoenixPartners provides management consulting services to government and corporate clients. Phoenix has two support departments—administrative services(AS) and information systems(IS)—and two operating departments—government consulting (GOVT) and corporate consulting (CORP). For the first quarter of 2017, Phoenix's cost records indicate the following:
|
SUPPORT |
OPERATING |
||||
|---|---|---|---|---|---|
|
AS |
IS |
GOVT |
CORP |
Total |
|
|
Budgeted overhead costs before any interdepartment cost allocations |
$600,000 |
$2,400,000 |
$8,756,000 |
$12,452,000 |
$24,208,000 |
|
Support work supplied by AS (budgeted head count) |
0 |
25% |
40% |
35% |
100% |
|
Support work supplied by IS (budgeted computer time) |
10% |
0 |
30% |
60% |
100% |
Requirement 1a. Allocate the two support departments' costs to the two operating departments using the reciprocal method.
First, determine the linear equations for each support department.
Homework Answers
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| Phoenix | |||||
| Reciprocal Method | AS | IS | GOVT | CORP | Total |
| Support work supplied by AS | 0.00% | 25.00% | 40.00% | 35.00% | 100.00% |
| Support work supplied by IS | 10.00% | 0.00% | 30.00% | 60.00% | 100.00% |
| Department cost | 600,000.00 | 2,400,000.00 | 8,756,000.00 | 12,452,000.00 | 24,208,000.00 |
| Let cost of AS is $ X and IS $ Y | |
| So, X= 600000+ 10% of Y | Equation 1 |
| Y= 2400000+ 25% of X | Equation 2 |
| Or, X= 600000+ 0.10Y | |
| Y= 2400000+ 0.25X |
| Substituting the value of X in equation 2: |
| Y = 2400000 + 0.25(600,000 + 0.10Y) |
| Y = 2400000 + 150000+.0025Y |
| Y – 0.025Y = 2400000+150,000 |
| 0.975Y = 2,550,000 |
| Y = 2,550,000/0.975 |
| Y = $ 2,615,385 |
| Substituting the value of Y in equation 1: |
| So, X= 600000+ .010Y |
| So, X= 600000+ 0.10*2615385 |
| So, X= 600000+ 261538 |
| X= $ 861,538 |
| Allocation Summary | AS | IS | GOVT | CORP | Total |
| Support work supplied by AS | - | 25.00% | 40.00% | 35.00% | 100.00% |
| Support work supplied by IS | 10.00% | - | 30.00% | 60.00% | 100.00% |
| Department cost | 600,000.00 | 2,400,000.00 | 8,756,000.00 | 12,452,000.00 | 24,208,000.00 |
| Allocation | |||||
| S 1 | (861,538.00) | 215,385.00 | 344,615.00 | 301,538.00 | - |
| S 2 | 261,538.00 | (2,615,385.00) | 784,616.00 | 1,569,231.00 | - |
| Cost after allocation | - | - | 9,885,231.00 | 14,322,769.00 | 24,208,000.00 |
Add Answer to:
PhoenixPartners provides management consulting services to
government and corporate clients. Phoenix has two support
departments—administrative services(AS)...
Phoenix Partners provides management consulting services to government and corporate clients. Phoenix has two support departments-administrative...
Phoenix Partners provides management consulting services to government and corporate clients. Phoenix has two support departments-administrative services (AS) and information systems (15)—and two operating departments-government consulting (GOVT) and corporate consulting (CORP). For the first quarter of 2017, Phoenix's cost records indicate the following: SUPPORT ASIS OPERATING GOVT CORP Total $ 600,000 $ 2,400,000 $8,756,000 $ 12,452,000 $ 24,208,000 Budgeted overhead costs before any interdepartment cost allocations Support work supplied by AS (budgeted head count) Support work supplied by IS (budgeted...
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Phoenix Partners provides management consulting services to
government and corporate clients. Phoenix has two support
departmentslong dashadministrative services (AS) and information
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For the first quarter of 2017, Phoenix's cost records indicate
the following:
1.
Allocate the two support departments' costs to the two
operating departments using the following methods:
a.
Direct method
b.
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c.
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For the first quarter of 2017, Phoenix's cost records indicate
the following:
1.
Allocate the two support departments' costs to the two
operating departments using the following methods:
a.
Direct method
b.
Step-down method (Allocate AS first)
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