Question

Manhattan Partners provides management consulting Services to government and corporate clients Manhattan has two support departments administrative services (AS) and information systems (15) and two operating departments government consulting (GOT) and corporate consulting (CORP) For the first quarter of 2017. Manhattan's cost records indicate the following 11. Click the icon to view the cost records) The two support department costs have been allocated to the two operating departments in the direct method and the p-down method (AS department and the step-down methods afin The rest of the allocations are as follows C heloon to view the direct method.) C e con to view the step-down methods Click the icon to view the step down method (IS ) B lok the icon to view a Suary of the three methods Read the requirements method Requirements. Alocate the support departments the two operating departments using the co First determine the rear equations for each support department 1600.000 0.10 15 $3,000,000 020 AS wa n ces) s Now locate the port departments' costs AS and department costs that you determined in the prior to the two pewing departments using the reciprocal method and decimal placesXIX, and your final answers to the nearest whole dollar Use parents or a minus when an depan by cong costs for any co Support Departments Operating Departments Total GOVT CORP Reciprocal Method Budgeted overhead costs before interdepartment cost locations Allocation of AS costs Enter any number in the edit fields and then click Check Answer

Answer 1

D 1 Reciprocal Method (Using Equation) ! 2 AS = 660000+ 0.10(IS) 3 IS= 3900000+ 0.20(AS) 4 Substituting the value of AS in 2nd equation 5 IS = 3900000 +0.20[660000+0.101S] 6 IS = 3900000 + 132000+ 0.021S 7 0.981S = 4032000 8 IS = 4032000/0.98 $ 41,14,285.71 Substituting the value of Admin in 1st equation AS = 660000 +0.10*4114285.71 AS = 660000 + 411428.57 AS = $ 10,71,428.57 9 Govt. 88,50,000.00 5,14,285.71 11,10,857.14 1,04,75,142.86 Corp $ 1,24,20,000.00 $ 3,42,857.14 $ 25,92,000.00 $ 1,53,54,857.14 Total $ 2,58,30,000.00 $ $ $ 2,58,30,000.00 IS 10 AS 11 Costs before Allocation $ 6,60,000.00 $ 39,00,000.00 $ 12 AS departments Allocation $-10,71,428.57 $ 2,14,285.71 $ 13 is department Allocation $ 4,11,428.57 $-41,14,285.71 $ 14 Total Costs after allocation $ 0.00 $ -0.00 $ 15 16 Reciprocal Method (Repeated Distribution) 17 AS 18 Costs before Allocation $ 6,60,000.00 $ 39,00,000.00 $ 19 AS departments Allocation - 1 $ -6,60,000.00 $ 1,32,000.00 $ 20 IS department Allocation-2 $ 4,03,200.00 $-40,32,000.00 $ 21 AS departments Allocation - 1 $ -4,03,200.00 $ 80,640.00 $ 22 is department Allocation-2 $ 8,064.00 $ -80,640.00 $ 23 AS departments Allocation - 1 $ -8,064.00 $ 1,612.80 $ 24 is department Allocation-2 161.28 $ -1,612.80 $ 25 AS departments Allocation - 1 $ - 161.28 $ 32.26 $ 26 is department Allocation-2 3.23 $ -32.26 $ 27 Rounding off $ -3.23 - $ - Govt. Corp Total 88,50,000.00 $ 1,24,20,000.00 $ 2,58,30,000.00 3,16,800.00 $ 2,11,200.00 $ 10,88,640.00 $ 25,40,160.00 $ 1,93,536.00 $ 1,29,024.00 $ 21,772.80 $ 50,803.20 $ 3,870.72 $ 2,580.48 $ 435.46 $ 1,016.06 $ 77.41 $ 51.61 $ 8.71 $ 20.32 $ 3.23 $ 1,04,75,141.10 $ 1,53,54,858.90 $ 2,58,30,000.00 28 20

Requirement 2:

In reciprocal method two way allocation is done for even support department costs. First support department costs is allocated to second support department and vice versa. Whereas, in Step allocation, One way allocation is done for support department costs, for e.g., first support department cost will be allocated to second support department but it will not receive further allocation from any other support department.

In direct allocation, support department costs are allocated only to operating departments. Neither of support department costs is allocated to other support department.