The Western Mountain Company has prepared department overhead budgets for budgeted-volume levels before allocations as follows: (Click the icon to view the department overhead budgets.) Support departments: Building and grounds Personnel General plant administration Cafeteria: Operating loss Storeroom Operating departments: Machining Assembly Total for support and operating departments $ 52,500 1,650 19,435 105 360 $ 74,050 $ 34,000 48,900 82,900 $ 156,950 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: (Click the icon to view the data.) Direct Manufacturing Department Building and grounds Personnela General plant administration Labor-Hours Number of Employees Square Feet of Floor Space Indirect Manufacturing Occupied Labor-Hours Number of Requisitions 0 0 0 0 0 0 0 1,000 0 0 0 35 Cafeteria: operating loss 0 10 Storeroom 0 515 7,000 0 0 5,000 2,000 0 6,000 3,000 0 Machining 4,000 50 35,000 5,000 3,000 12,000 100 296,000 10,800 1,000 Assembly 16,000 200 350,000 20,800 4,000 Total aBasis used is number of employees 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 Job 88 24 Job 89 5 Assembly 1 21 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 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.) Support Departments Operating Departments Costs incurred Allocation of costs: Building and grounds Personnel General plant administration Cafeteria General Cafeteria Bldg and Grounds Personnel Plant Operating Admin. Loss Storeroom Machining Assembly Costs incurred Allocation of costs: Support Departments General Cafeteria Plant Operating Admin. Loss Bldg and Grounds Personnel Operating Departments Storeroom Machining Assembly Building and grounds Personnel General plant administration 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.) Step-down method: Overhead rate per direct Total costs allocated to department Direct manufacturing labor-hours = manufacturing labor-hour Machining Assembly = Requirement 2. Using the direct method, rework requirement 1. Using the direct method, allocate support-department costs. (Round cost allocations to the nearest whole dollar. Use parentheses or a minus sign when decreasing departments by allocating costs.) Support Departments Operating Departments Costs incurred Allocation of costs: Bldg and General Plant Cafeteria Grounds Personnel Admin. Operating Loss Storeroom Machining Assembly Building and grounds Personnel General plant administration 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: Total costs allocated to department Machining Assembly Overhead rate per direct Direct manufacturing labor-hours = manufacturing labor-hour Requirement 3. Based on the information about two jobs, determine the total overhead costs for each job by using rates developed in (a) requirement 1 and (b) requirement 2. Start by computing the total overhead costs for each job using the rates developed in (a) requirement 1 (the step-down method.) (Round the total overhead costs to the nearest cent.) (a) Step-down method: Total Overhead Costs Job 88: Machining Assembly Total cost of Job 88 Job 89: Machining Assembly Total cost of Job 89 Now compute the total overhead costs for each job using the rates developed in (b) requirement 2 (the direct method). (Round the total overhead costs to the nearest cent.) (b) Direct method: Job 88: Machining Assembly Total cost of Job 88 Job 89: Machining Total Overhead Costs Assembly Total cost of Job 89 Requirement 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. The manager of machining department would since amount of overhead costs being allocated to the machining department.