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Hudson Partners provides management consulting services to government and corporate clients. Hudson has two support departments administrative services (AS) and information systems (18) and two operating departments government consulting (GOVT) and corporate consulting (CORP) For the first quarter of 2017 Hudson's cost records indicate the following Click the icon to view the cost records) Ponth SUPPORT OPERATING AS IS GOVT CORP Total $ 630.000 $ 2,100,000 $ 8,675,000 $ 12,550,000 $ 23,955,000 Budgeted overhead costs before any interdepartment cost allocations Support work supplied by AS (budgeted head count) Support work supplied by IS (budgeted computer time) 0 20% 52% 28% 100% 10% 27% 63% 100% 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) C. Step-down method (Allocate IS first) 2. Compare and explain differences in the support-department costs allocated to each operating department. 3. What approaches might be used to decide the sequence in which to allocate support departments when using the step-down method? Support Departments Operating Departments GOVT CORP AS IS Total Direct Method Budgeted overhead costs before interdepartment cost allocations Allocation of AS costs Allocation of IS costs Total budgeted overhead of operating departments Support Departments Operating Departments AS IS GOVT CORP Total Step-down Method Budgeted overhead costs before interdepartment cost allocations Total budgeted overhead of operating departments Support Departments Operating Departments AS IS GOVT CORP Total Step-down Method Budgeted overhead costs before interdepartment cost allocations Total budgeted overhead of operating departments CORP Begin by entering the total support department costs allocated to each operating department under each of the methods below GOVT Direct method Stop down (AS first) Step down (IS first) The direct method The step down method a disproportionale usage of Is services by CORP. Therefore, when AS conto ate allocated first it results in GOVT:s usage of the AS group exceeds CORPY Therefore, when AS costs are allocated second it results in There is to CORP Similarly to GOVT Requirement 3. What approaches might be used to decide the sequence in which to allocate support departments when using the s not used in the table, leave the box empty, do not select a label.) The approaches that could determine the sequence in the step-down method are: Allocate support departments on a ranking of the percentage of their total services provided to other support departments Allocate support departments on a ranking of the total dollar amount in the support departments. Allocate support departments on a ranking of the total dollar amounts of services provided to other support departments Allocate support departments on a ranking of the total profits in operating departments Allocate support departments a using a system that best maximizes tax advantages in operating departments

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