Question

The Heightened Hill Company has prepared department overhead budgets for​ budgeted-volume levels before allocations as​ follows:

Support departments:
Building and grounds	$21,000
Personnel	1,520
General plant administration	36,960
Cafeteria: Operating loss	105
Storeroom	2,975	$62,560
Operating departments:
Machining	$34,000
Assembly	49,000	83,000
Total for support and operating departments		$145,560

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 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
Personnelª	0	0	2,000	0	0
General plant administration	0	40	12,000	0	0
Cafeteria: operating loss	0	5	2,500	2,000	0
Storeroom	0	5	7,000	3,000	0
Machining	5,000	60	48,000	8,000	3,000
Assembly	15,000	90	78,500	17,000	1,000
Total	20,000	200	150,000	30,000	4,000
ªBasis used is number of employees

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
Allocation of costs:
	Building and grounds
	Personnel
	General plant administration
	Cafeteria
	Storeroom
Total budgeted costs of operating departments

Answer 1

Step-down method Operating Departments Allocations Buildings & Ground $21,000 Support Departments General Plant Personnel Cafeteria Storeroom Admin $1,520 $36,960 $105 $2,975 Machining Assembly Total $34,000 $49,000 $145,560 -$21,000 costs incurred Allocation of costs Buildings and Ground Personnel General Plant admin Cafeteria Storeroom Total budgeted costs $280 $1,800 $1,680 $360 $39,000 $350 $45 $2,600 -$3,100 $980 $45 $3,900 $100 -$8,000 $0 $6,720 $10,990 $540 $810 $10,400 $22,100 $1,200 $1,800 $6,000 $2,000 $58,860 $86,700 $145,560 $0 $0 $0 $0 Working notes: Machining Assembly Total Support Buildings & Department Basis for allocation Ground Buildings and Ground Square Feet of floor Personnel Number of employees General Plant admin indirect mfg labor hours Cafeteria Number of employees Storeroom Number of requisitions General Plant Personnel Cafeteria Storeroom Admin 2,000 12,000 2,500 7,000 40 5 5 2,000 3,000 5 48,000 60 8,000 60 78,500 150,000 90 200 17,000 30,000 90 155 1,000 4,000 3,000 Total Ratio for step wise allocation Support Buildings & Department Ground Buildings and Ground Personnel General Plant admin Cafeteria Storeroom General Plant Personnel Cafeteria Storeroom Admin 1.33% 8.00% 1.67% 4.67% 20.00% 2.50% 2.50% 6.67% 10.00% 3.23% Machining Assembly 32.00% 52.33% 30.00% 45.00% 26.67% 56.67% 38.71% 58.06% 75.00% 25.00% 100% 100% 100% 100% 100%