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"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. Machine- Direct Labor- Hours Hours Department Personnel Custodial Services Maintenance Printing Binding Total Labor- square feet of Number of Hours Space Occupied Employees 16,200 12,300 27 B. 100 3.500 41 14,000 10,800 64 30,700 40,000 108 101,000 20.100 302 170,000 86.700 542 160,000 50,000 210,000 16,000 80,000 96,000 Budgeted overhead costs in each department for the current year are shown below: Personnel Custodial Services Maintenance Printing Binding Total budgeted cost $340,000 65,500 93,800 416,000 166,000 $1.081,300 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 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 2,000 600 3.400 Direct Labor-Hours 1,400 12.100 10.500 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 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. Complete this question by entering your answers in the tabs below. 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 Services Maintenance Printing Binding Departmental costs before allocations $ 340,000 $ 65,500 $ 93,800 $ 416,000 $ 166,000 Allocations: Personnel costs (340,000) 26,705 41.686 70,345 196.705 Custodial services costs 192,205) 45.907 Maintenance costs (181,393) Total costs after allocations 0 0 0 486,345 362,705 Predetermined overhead rate Nee Reg 2 > 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. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req 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 rest of the answers to the nearest whole dollar amount.) Show less Custodial Personnel Services Maintenance Printing Binding Departmental costs before allocations $ 340,000 $ 65,500 5 93,800 $ 416,000 s 166,000 Allocations Personnel costs (340,000) Custodial services costs (65,500) Maintenance costs (93,800) Total costs after allocations 0 0 416,000 166.000 Predetermined overhead rato 0 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. Complete this question by entering your answers in the tabs below. Req1 Reg 2 Reg 3A Determine the amount of overhead cost 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 cost that would be assigned to the job if the company used the overhead rates developed in requirement 2. (Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.) Show less Total Overhead Cost Step-down method Direct method ( Req2 RA
