The Central Valley Company has prepared department overhead budgets for budgeted volume levels before allocations as follows:
Support departments:
Building and grounds ............................................... $10,000
Personnel .............................................................. 1,000
General plant administration ........................................ 26,090
Cafeteria: operating loss ............................................. 1,640
Storeroom .............................................................. 2,670
Total for support departments ............................................... $41,400
Operating departments:
Machining ............................................................. $34,700
Assembly .............................................................. 48,900
Total for operating departments ............................................... 83,600
Total for support and operating departments ................................ $125,000
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:

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.

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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Square Feet Number of Floor Direct Manufacturing of Space Manufacturing Number of Department Labor-Hours Employees Occupied Labor-Hours Requisitions Building and grounds Personnela General plant administration Cafeteria: operating loss Storeroom Machining Assembly Total 2,000 7,000 ,000 7,000 0,000 50,000 00,000 35 5,000 15,000 20,000 50 100 200 1,000 1,000 8,000 17,000 27,000 2,000 1,000 3,000 Basis used is number of employees Direct Manufacturing Labor-Hours Assembly Machining Job 88 Job 89 18 17