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	Square feet of floor space occupied
Personnel	Number of employees
General plant administration	Manufacturing labor-hours
Cafeteria: operating loss	Number of employees
Storeroom	Number of requisitions

Part 2

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
				General	Cafeteria
		Bldg and		Plant	Operating
		Grounds	Personnel	Admin.	Loss	Storeroom	Machining	Assembly
Costs incurred		12000	2300	19440	2600	17570	36000	48900
Allocation of costs:
	Building and grounds	-12000	1500
	Personnel		3800	19440
	General plant administration			0	2600
	Cafeteria				0	17570
	Storeroom					0
Total budgeted costs of operating departments

Department	Direct Manufacturing Labor-Hours	Number of Employees	Square Feet of Floor Space Occupied	Indirect Manufacturing Labor-Hours	Number of Requisitions
Building and grounds	0	0	0	0	0
Personnel	0	0	2,500	0	0
General plant administration	0	40	4,000	0	0
Cafeteria: operating loss	0	10	5,000	1,000	0
Storeroom	0	5	6,000	2,000	0
Machining	4,000	55	27,500	5,000	6,000
Assembly	12,000	140	105,000	14,400	4,000
Total	16,000	250	150,000	22,400	10,000
Basis 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 LaborHours
	Machining	Assembly
Job 88	19	6
Job 89	6	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:
Building and grounds	$12,000
Personnel	2,300
General plant administration	19,440
Cafeteria: Operating loss	2,600
Storeroom	17,570	$53,910
Operating departments:
Machining	$36,000
Assembly	48,900	84,900
Total for support and operating departments		$138,810