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Please answer correctly and give me an explanation on this problem
"This is really an odd situation," sald Jim Carter, general manager of Highland Publishing Company. We get most of the jobs we bid on that require a lot of press time in the Printing Department, yet profits on those jobs are never as high as they ought to be. On the other hand, we lose most of the jobs we bid on that require a lot of time in the Binding Department. I would be inclined to think that the problem is with our overhead rates, but we're already computing separate overhead rates for each department. So what else could be wrong?" Highland Publishing Company is a large organization that offers a variety of printing and binding work. The Printing and Binding departments are supported by three service departments. The costs of these service departments are allocated to other departments In the order listed below. The Personnel cost is allocated based on number of employees. The custodial Services cost is allocated based on square feet of space occupled and the Maintenance cost is allocated based on machine-hours. Machine- Hours Direct Labor Hours Department Personnel Custodial Services Maintenance Printing Binding Total Labor- Hours 16,828 8,800 14,9ee 30, 6ee 185, eee 176, 100 Square Feet of Space Occupied 12,600 3,800 10,400 40,900 20,700 88,480 Number of Employees 27 47 69 184 308 555 168,888 45,000 213,888 19,000 71,000 90,000 Budgeted overhead costs in each department for the current year are shown below: Personnel Custodial Services Maintenance Printing Binding Total budgeted cost $ 340,000 65,800 93,700 417,000 167,200 $1,683,500 Because of its simplicity, the company has always used the direct method to allocate service department costs to the two operating departments. Required: 1. Using the step-down method, allocate the service department costs to the consuming departments. Then compute predetermined overhead rates in the two operating departments. Use machine-hours as the allocation base in the Printing Department and direct labor-hours as the allocation base in the Binding Department. 2. Repeat (1) above, this time using the direct method. Again compute predetermined overhead rates in the Printing and Binding departments. 3. Assume that during the current year the company bids on a job that requires machine and labor time as follows: Printing Department Binding Department Total hours Machine-Hours 2,300 7ee 3, eee Direct Labor-Hours 1, eee 13,7ee 14,7ee a. Determine the amount of overhead cost that would be assigned to the job if the company used the overhead rates developed in (1) above. Then determine the amount of overhead cost that would be assigned to the job if the company used the overhead rates developed In (2) above. Reg 1 Reg 2 Req 3A Using the step-down method, allocate the service department costs to the consuming departments. Then compute predetermined overhead rates in the two operating departments. Use machine-hours as the allocation base in the Printing Department and direct labor- hours as the allocation base in the Binding Department. (Please enter allocations from a department as negative and allocations to a department as positive. The line should add across to zero. Do not round intermediate calculations. Round "Predetermined overhead rate" to 2 decimal places and rest of the answers to the nearest whole dollar amount.) Show less Maintenance Printing Personnel Custodial Services $ 340,000 $ 65,800 Binding S 167,000 S 93,700 $ 417,000 (340,000) Departmental costs before allocations Allocations: Personnel costs Custodial services costs Maintenance costs Total costs after allocations Predetermined overhead rate 0 65,800 93,700 417,000 167,000 Reg 1 Reg 2 Reg 3A Repeat requirement 1 above, this time using the direct method. Again compute predetermined overhead rates in the Printing and Binding departments. (Please enter allocations from a department as negative and allocations to a department as positive. The line should add across to zero. Do not round intermediate calculations. Round "Predetermined overhead rate" to 2 decimal places and resto the answers to the nearest whole dollar amount.) Show less Personnel Maintenance Custodial Services S 65,800 Printing Binding S 417,000 $ 167,000 S 340,000 $ 93,700 Departmental costs before allocations Allocations: Personnel costs Custodial services costs Maintenance costs Total costs after allocations Predetermined overhead rate 340,000 65,800 93,700 417,000 167,000 Reg 1 Reg 2 Reg 3A Determine the amount of overhead cost that would be assigned to the job if the company used the over in requirement 1 above. Then determine the amount of overhead cost that would be assigned to the job the overhead rates developed in requirement 2. (Round your intermediate calculations to 2 decimal plac to the nearest whole dollar amount.) Total Overhead Cost Step-down method Direct method
