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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 or 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- Hours Direct Labor- Hours Department Personnel Custodial Services Maintenance Printing Binding Total Labor- Square Feet of Hours Space Occupied 16,000 12,500 8,200 3,800 14,100 10,700 30,500 40,900 106,000 20,200 174,800 88,100 Number of Employees 26 46 61 104 309 546 162,000 49,000 211,000 12,000 78,000 90,000 Budgeted overhead costs in each department for the current year are shown below: Personnel Custodial Services Maintenance Printing Binding Total budgeted cost $ 310,000 65,900 93,700 415,000 163,000 $1,047,600 Because of its simplicity, the company has always used the direct method to allocate service department costs to the two operating HOW 3 Printing Binding Total budgeted cost 9500 415,000 163,000 $1,047, 600 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 2,900 600 3,500 Direct Labor-Hours 1,200 13,200 14,400 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. W NOV P MacBook Pro lile company used the overhead rates Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 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 Printing Binding Services $ 65,900 $ 93,700 $ 415,000 $ 163,000 $ 310,000 Departmental costs before allocations Allocations: Personnel costs 27,423 (310,000) 0 Custodial services costs (93,323) 36,365 13,910 (143,975) 0 Maintenance costs Total costs after allocations Predetermined overhead rate 62,000 53,170 110.160 640,330 3.95 184,212 26,260 33,320 406,792 5.25 0 0 $ $ Reg 1 Req2 > 40V 3 MacBook Pro