4.

Requirements

Dialog content starts

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
Job 88	21	3
Job 89	10	16

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.

Data table

Dialog content starts

Support departments:
Building and grounds	$13,600
Personnel	1,545
General plant administration	54,800
Cafeteria: Operating loss	436
Storeroom	6,762	$77,143
Operating departments:
Machining	$32,000
Assembly	46,000	78,000
Total for support and operating departments		$155,143

Data table

Dialog content starts

Department	Direct Manufacturing Labor-Hours	Number of Employees	Square Feet of Floor Space Occupied	Indirect Manufacturing Labor-Hours	Number of Requisitions
Building and grounds	0	0	0	0	0
Personnel	0	0	1,500	0	0
General plant administration	0	30	12,000	0	0
Cafeteria: operating loss	0	12	6,000	1,000	0
Storeroom	0	6	4,800	2,000	0
Machining	8,000	45	18,000	12,000	3,000
Assembly	32,000	57	37,700	37,000	2,000
Total	40,000	150	80,000	52,000	5,000
Basis used is number of employees

The HeightenedHill Company has prepared department overhead budgets for budgeted-volume levels before allocations as follows:

LOADING...

(Click

the icon to view the department overhead budgets.)

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:

LOADING...

(Click

the icon to view the data.)

Read the

requirements

LOADING...

.

Question content area bottom

Part 1

Requirement 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.

Begin by selecting the allocation base for each support department.

Support Department	Allocation Base
Building and grounds
Personnel
General plant administration
Cafeteria: operating loss
Storeroom