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15-30 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
15-30 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: Support departments: Building and grounds Personnel General plant administration Cafeteria: operating loss Storeroom 300 37 320 970 9,990 93,580 Operating departments: Machining Assembly $36,600 46,000 82,600 $176,180 Total for support and operating departments Management has decided that the most appropriate inventory costs are achieved by using individual- department overhead rates. These rates are developed after support-department costs are allocated to operating departments. Bases for allocation are to be selected from the following Direct Square Feet of Manufacturing Number of Floor Space Manufacturing Number of Labor-Hours Employees Occupied Labor-Hours Requisitions Department Building and grounds Personnel General plant administration Cafeteria: operating loss Storeroom Machining Assembly Total 2,500 12,000 5,000 6,000 22,000 202,500 250,000 40 10 6000 3000 2,000 8,000 32,000 40,000 13,000 26,000 44,000 140 4,000 10,000 Basis used is number of employees 1. Using the step-down method, allocate support-department costs. Develop overhead rates per direct manufacturing labor-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 Direct Manufacturing Labor-Hours Machining 17 Job 88 Job 89 20
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