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

Support departments:
Building and grounds	$9,000
Personnel	1,660
General plant administration	16,750
Cafeteria: Operating loss	2,585
Storeroom	1,785	$31,780
Operating departments:
Machining	$35,300
Assembly	48,900	84,200
Total for support and operating departments		$115,980

Management has decided that the most appropriate inventory costs are achieved by using individual department overhead rates. These rates are developed aftersupport-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
Department	Labor-Hours	Employees	Occupied	Labor-Hours	Requisitions
Building and grounds	0	0	0	0	0
Personnel*	0	0	6,000	0	0
General plant administration	0	40	16,000	0	0
Cafeteria: operating loss	0	5	2,000	1,000	0
Storeroom	0	5	6,000	3,000	0
Machining	9,000	60	30,000	5,000	3,000
Assembly	9,000	90	40,000	11,700	1,000
Total	18,000	200	100,000	20,700	4,000
*Basis used is number of employees

Requirments

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 LOADING... , 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 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.

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