"I can't understand what's hsppening here," said Mike Halt president of Severson Products inc

We slivys seem to bid too high on jobs that require ol at of lobour time in the Finlahing Deportment, snd we shwsys seem to get

every job we bid an that requlres s lot of mochine time in the Miling Deportment. Yet we don't seem to be making much maney on

those Miling Deportment jobs. I wonder if the problem is in our overnesd rastes."

Geverzan Products manufactures high$-$quslity wood products to customers' specifications. Some jobs take a large amount of mochine

work in the Miling Depsitment, and other jobs take ol large smount of hand$-$finishing work in the Fin'shing Deportment. In sidition to

the Milling and Finishing Deportments, the compony has three senvice deportments. The costs of these senve deportments sre

alocsted to ather depsitments in the order llsted below. For esch servise depsitment, use the most spproprate alocstion bsse:

Budgeted overhesd casts in esch deportment for the current year ore as follows:

This represents the smount of cozt subaidzed by the compsny.

The company has alwsys alocsted service deportment costs to the opereting deportments $($Milling snd Finishing$)$ uaing the direct

method of ocstion, becsuse of tis simplicity.

Requlred:

Alocote senice deportment costs to opersting depsitments by the step$-$down method. Then comoute predetermined averhesd

retes in the opersting deositments for the current yesr, using machine$-$hours ss the solocstion bsse in the Milling Deasitment snd

direct labourthours ss the slocation base in the Finlishing Depsitment. $($Round "Predetermined overhead rate" answers to $2$ decimal

pleces. Negatlve amounts should be indicsted by s minus sign.$)$

$2$ Repest $($requlrement $1)$ sbove, this time using the direct method. Agsin compute predetermined averhesd rates in the Milling and

Finlshing deportments. $($Round "Predetermined overhead rate" snswers to $2$ declimal places. Negstive amounts should be Indicsted

by a milnus sign.$)3.$ Assume that during the current year the company bids on a job that requires machine and labour time as follows:

Machine$-$Hours Direct Labour$-$Hours

Milling Department $2,0001,600$

Finishing Department $80013,000$

Total hours $2,80014,600$

$3-$a$.$ Determine the amount of overhead that would be assigned to the job if the company used the overhead rates developed in $($requirement $1)$ above. Then determine the amount of overhead that would be assigned to the job if the company used the overhead rates developed in $($requirement $2)$ above. $($Round the predetermined overhead rates to $2$ decimal places.$)$