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 individualdepartment

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.

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.

Transcribed Image Text:

Support departments: Building and grounds Personnel General plant administration Cafeteria: operating loss Storeroom Operating departments: Machining Assembly Total for support and operating departments $45,000 300 37,320 970 9,990 $36,600 46,000 $ 93,580 82,600 $176,180 Support departments: Building and grounds Personnel General plant administration Cafeteria: operating loss Storeroom Operating departments: Machining Assembly Total for support and operating departments $45,000 300 37,320 970 9,990 $36,600 46,000 $ 93,580 82,600 $176,180

Answer rating: 100% (QA)

Part 1 Buildings and grounds personnel Stepdown method 90000 200 1 buildings and ground 90000300000 ... View the full answer