The Central Valley 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:

Required
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
(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.

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Support departments: Building and grounds Personnel General plant administration Cafeteria: operating loss Storeroom $45,000 300 37,320 970 9,990 $ 93,580 Operating departments: Machining Assembly $36,600 46,000 82,600 $176,180 Total for support and operating departments Square Feet of Manufacturing Number of Floor Space Manufacturing Number of Labor-Hours Employees Occupied Labor-Hours Requisitions Direct Department Building and grounds Personnel General plant administration Cafeteria: operating loss Storeroom Machining Assembly Total 3,000 2,000 13,000 26,000 44,000 32,000 40,000 202,500 250,000 6,000 4,000 10,000 140 Basis used is number of employees. Direct Manufacturing Labor-Hours Machining 17 Assembly Job 88 Job 89 20