Case 4B-7 Step-Down Method versus Direct Method [LO4-10, LO4-11] This is really an odd situation said 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. l would be inclined to think that the problem is with our but we're already computing separate overhead rates for each department. So what else overhead rates, 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 (For each service department, use the allocation base that provides the best measure of service provided, as discussed in the chapter.) Square Feet Direct Tota of Space Number of Machine- Labor. Department Labor-Hours occupied Employees Hours Hours Personnel 16,900 12,300 29 Custodial Services 8.800 3,200 44 Maintenance 4,600 10,100 62 Printing 30,200 40,800 110 161,000 20,000 20,700 Binding 109,000 300 48,000 79,000 209,000 179,500 87,100 545 99.000 Budgeted overhead costs in each department for the current year are shown below: Personnel 330,000 Custodial Services 65,900 Maintenance 93,400 Printing 417,000 Binding 166,000 Total budgeted cost $1,072,300 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 for the current year using 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 your answers to the nearest dollar amount.)