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The Central Valley Company has prepared department overhead budgets for budgeted-volume levels before allocations as follows:

Support departments:
Building and grounds	$90,000
Personnel	200
General plant administration	30,055
Cafeteria: Operating loss	155
Storeroom	5,190	$125,600
Operating departments:
Machining	$33,000
Assembly	49,000	82,000
Total for support and operating departments		$207,600

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:

Department	Direct Manufacturing labour-hours	Number of employees	Square feet on floor space occupied	Manufacturing labour-hours	Number of requisitions
Building and grounds	0	0	0	0	0
Personnel*	0	0	4000	0	0
General Plant administration	0	35	7000	0	0
Cafeteria: operating loss	0	10	2000	1000	0
Storeroom	0	5	4000	2000	0
Machining	9000	50	25000	9000	2500
Assembly	9000	100	258000	9600	2500
Total	18000	200	300000	21600	5000

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

Job	Direct Manufacturing Labor-hours	Machining Assembly
88	23	3
89	8	19

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