The Bow River company has prepared division Overhead budgets for budgeted-volume levels before allocation as follows;

Support departments:

Building and gounds10000

Personnel1000

General plant administration26090

Cafeteria operating loss1640

Storeroom267041400

Operating departments

Machining34700

Assembly48900 83600

Total for support and operating departments 125000

Management has decided that the most appropriate inventory costs are achieved by using individual division overhead rates. These rates are developed after support division costs are allocated to operating divisions.

Bases for allocation are to be selected from the following:

Department

Direct manufacturing labour hours

Number of employees

Square meters of floor space occupied

Manufacturing labour hours

Number of requistions

Building and grounds

0

0

0

0

0

Personnel

0

0

2000

0

0

General plant administration

0

35

7000

0

0

Cafeteria, operating loss

0

10

4000

1000

0

Storeroom

0

5

7000

1000

0

Machining

5000

50

30000

8000

2000

Assembly

15000

100

50000

17000

1000

Total

20000

200

100000

27000

3000

Required:

1. Using the step down method allocate support division costs. Develop overhead rates per direct manufacturing labour-hour for machining and assembly. Allocate the costs of the support divisions in the order given in the proble. Use the allocation base for each support division you think is most appropriate.

2. Using the direct method rework requirement.

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