(Appendix) Cost Allocation and Analysis of Applied Overhead: White Paper Packaging Corporation prepares cardboard cartons according to cus- tomer orders. The company uses a job cost system because the orders are sufficiently different from one customer to another. The company has two producing depart- ments: printing and folding. Box cardboard is received in the printing department. There it is cut to the appropriate size and imprinted with the customer's specified advertising or other information. Printed cardboard is transported to the folding department where special equipment folds and glues the boxes. When the boxes are completed, they are delivered to the warehouse for shipment to customers. Normally, boxes are considered finished when they are ready for shipment to the customer.

The producing departments are serviced by three service areas: materials handling, payroll accounting, and building occupancy. Materials-handling costs are allocated based on direct materials used by each department. Payroll accounting costs are allocated based on total employees in each department, while dual allocation rates are used for building occupancy costs. The fixed building costs are allocated on the basis of department area, while the variable costs are allocated on the basis of labor costs.

During the current month, the following information is available concerning the direct costs and the use of various allocation bases by each of the departments.

Overhead is applied to production on the basis of 200 percent of direct labor costs in the departments. In printing, 30 percent of the direct overhead was fixed, while in folding. 80 percent of the direct overhead was fixed. Materials-handling costs are considered variable, and payroll accounting costs are considered fixed for analytic purposes.

Estimated labor costs for the period were $575,000 in printing and $450,000 in folding. While the allocated fixed costs were as anticipated, budgeted fixed costs in the printing department were $195,000, and in folding the costs were budgeted at $396,000.

Required: Determine the applied overhead in each of the producing departments. The first two rows of the matrix A^-1 are as follows:

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Direct Building Labor Number of Department Costs Area Costs Employees Materials handling (S1) $245,000 .25 .10 .08 Payroll accounting (S4) 90,000 .10 Building occupancy: Fixed costs (S2) 128,000 - Variable costs (S3) 49,000 18 .05 581 .07 1 .05 .07 .03 Printing (P1): Direct materials 975,000 Direct labor 430,000 Overhead 650,000 25 .25 .35 .37 37 Folding (P2): Direct materials 65,000 Direct labor 480,000 .35 95 .43 .45 Overhead 615,000