Allocating costs of support departments; step-down and direct methods. The Central Valley Company has prepared department overhead budgets for budgeted-volume levels before allocations as follows:

REQUIRED 1. Using the step-down method, allocate support department costs. Develop overhead rates per direct manufacturing labour-hour for machining and assembly. Allocate the costs of the support departments in the order given in this problem. Use the allocation base for each support department you think is most appropriate.
2. Using the direct method, rework requirement 1.
3. Based on the following information about two jobs, determine the total overhead costs for each job by using rates developed in

(a) requirement 1 and

(b) requirement 2.

4. The company evaluates the performance of the operating department managers on the basis of howwell they managed their total costs, including allocated costs. As the manager of the MachiningDepartment, which allocation method would you prefer from the results obtained in requirements 1 and 2? Explain.LO1

Transcribed Image Text:

Support departments: Building and grounds $10,000 Personnel 1,000 General plant administration 26,090 Cafeteria: operating loss 1,640 Storeroom 2,670 $ 41,400