Number of Hours Hours Maintenance 30,200 108.000 10,500 40,400 "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. 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 occupied and the Maintenance cost is allocated based on machine hours Total Labor Square feet of Machine Direct Labor Department Space Occupied Employees Personnel Hours 16,300 12,300 29 Custodial Services 8,500 3,400 14,100 Printing 161,000 17,000 Binding 20.00 227/100 Budgeted overhead costs in each department for the current year are shown below. Personnel $ 310,000 Custodial Services 65,600 Maintenance 93,400 Printing 419.000 Binding 162.000 Total budgeted cost 51,055,000 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: 64 100 303 545 86.900 40.000 201,000 78,000 95,000 Direct labor Machine Hours Hours Printing Department 2,200 1,200 Binding Department 200 13.000 Total hours 2.900 14.00 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 Reg 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 Personnel Custodial Maintenance Services Printing Binding Departmental costs before allocations $ 310,000 $ 65,600 5 93.400 419.000 $ 167 000 Allocations Personnel costs (310,000) Custodial services costs Maintenance costs Total costs after allocations 0 65,600 93.400 419.000 167 000 Pradetermined overhead rate Reg 2 >
