Part B (Service Department Cost Allocations) The Phoenix Publishing Company has three Service departments and two operating departments. Selected data from a recent period on the five departments follow: Operating Service Departments Departments Administration Custodial Personnel Maintenance Binding Printing Total Costs $358,000 $ 78,000 $35,000 $54,000 $488,000 $221,000 $1,234,000 Number of employees 30 10 12 60 100 150 362 Total labour hours 0 5,000 8,000 30,000 45,000 105,000 193,000 Square feet Space Occupied 7500 3500 5000 15000 95,000 25,000 151,000 Direct labour hours 20,000 100,000 120,000 Machine Hours 110,000 10,000 120,000 Binding and Printing are operating departments; the other departments are service departments. The costs of Factory Administration is allocated first based on labour-hours followed by Custodial Services based on square feet occupied; Personnel based on number of employees; and Maintenance based on machine-hours. The company is considering to bid a job that requires machine and labour time as follows: Machine Hours Labour-hours Printing Department 200 20 Binding Department 40 130 240 150 The company is considering three different approaches to calculate predetermined overhead rates for the job: a. Allocate the Service department costs to the operating departments using the Direct method. Then compute predetermined overhead rates in the operating departments, using a machine-hours basis in printing and a direct labour-hours basis in Binding Department. b. Allocate the Service department costs to the operating departments using the Step-down Method. Then compute predetermined overhead rates in the operating departments, using a machine-hours basis in printing and a direct labour-hours basis in Binding Department. C. The company doesn't bother with allocating service department costs but simply computes a single plant wide overhead rate based on total overhead costs divided by the total direct labour-hours. Required: Question 2.2 Calculate (i) the predetermined overhead rates under three different approaches. Show detail workings to support your calculations. Then (ii) compute the amount of overhead cost that would be assigned to the job if the overhead rates were developed using the direct method, step-down method and the plant wide method. (8 marks) Your Answer (add extra rows/columns to the template if required): Plantwide Direct Step-down Method Method Method Show your workings here (expand the space as required): tt tttttttt Question 2.3 Write a report to the management explaining which method would be more appropriate for the company to use for bidding the job. [Word limit: 150 words. Show the word count at the end of your answer] (4 marks) Your Answer (expand the space as required): C C C Word count=
