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

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:

REQUIREMENT:

REQUIREMENT 1 : Using the step-down method, allocate support-department costs. Allocate the costs of the support departments in the order given in this problem. (Round all indirect allocation rates to the nearest cent and all other computations to the nearest whole dollar. Use parentheses or a minus sign when decreasing departments by allocating costs)

X Data Table - 60,000 Support departments: Building and grounds Personnel General plant administration Cafeteria: Operating loss 360 46,980 1,890 2,490 $ Storeroom 111,720 Operating departments: Machining $ 34,000 46,000 Assembly 80,000 $ 191,720 Total for support and operating departments Print Done Data Table - Direct Manufacturing Labor-Hours Square Feet of Floor Space Occupied Number of Employees Indirect Manufacturing Labor-Hours Department Number of Requisitions Building and grounds 0 0 0 0 0 Personnel 0 0 1,800 0 0 0 36 10,800 0 0 General plant administration Cafeteria: operating loss 0 9 1,800 1,000 0 Storeroom 0 9 1,800 1,000 0 Machining 45 8,000 32,000 27,000 156,800 12,000 42,000 2,000 1,000 81 Assembly 40,000 180 200,000 56,000 3,000 Total aBasis used is number of employees Requirements -- 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 18 9 Job 89 7 22 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. Support Departments Operating Departments General Cafeteria Bldg and Plant Operating Grounds Personnel Admin. Loss Storeroom Machining Assembly Costs incurred Allocation of costs: Building and grounds Personnel General plant administration 10000 Cafeteria Storeroom Total budgeted costs of operating departments Develop overhead rates per direct manufacturing labor-hour for machining and assembly using the step-down method. (Round the overhead rates to three decimal places.) Overhead rate per direct . Direct manufacturing labor-hours = manufacturing labor-hour Step-down method: Total costs allocated to department Machining Assembly . Support Departments Operating Departments General Cafeteria Bldg and Plant Operating Grounds Personnel Admin. Loss Storeroom Machining Assembly Costs incurred Allocation of costs: Building and grounds Personnel General plant administration LIONI Cafeteria Storeroom Total budgeted costs of operating departments Develop overhead rates per direct manufacturing labor-hour for machining and assembly using the direct method. (Round the overhead rates to three decimal places.) Direct method: Overhead rate per direct Total costs allocated to department Direct manufacturing labor-hours manufacturing labor-hour Machining Assembly