15-30 Allocating costs of support departments; step-down and direct methods. The Eastern Summit 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 Operating departments: Machining Assembly Total for support and operating departments $45,000 7,800 36,120 20,670 18,300 $127,890 $36,000 60,000 96,000 $223,890 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: Indirect Manufacturing Number of Labor-Hours Requisitions 0 Department Building and grounds Personnel General plant administration Cafeteria: operating loss Storeroom Machining Assembly Total Direct Square Feet of Manufacturing Number of Floor Space Labor-Hours Employees Occupied 0 2,500 12,000 10 4,500 6,000 10,000 22,000 30,000 203,000 40,000 250,000 3,000 2,000 13,000 26,000 44,000 10,000 8,300 18,300 250 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 Assembly 18 Job 88 Job 89 10 20 4. The company evaluates the performance of the operating department managers on the basis of how well they managed their total costs, including allocated costs. As the manager of the Machining Department, which allocation method would you prefer from the results obtained in requirements 1 and 2? Explain