PROBLEM 48-6 Step-Down Method versus Direct Method; Predetermined Overhead Rates L04-10 The Sendai Co., Ltd., of Japan has budgeted costs in its various departments as follows for the Using lh Include under each billing center the service departments LO4-11 $270,000 coming year Factory Administration Custodial Services Personnel. . 68.760 28,840 45,200 376,300 Maintenance Machining-overhead Assembly-overhead. 175.900 $965,000 Total cost The company allocates service department costs to other departments in the order listed below Square Direct Feet of Total Space Occupied Machine- Labor- Number of Employees Labor- Hours Hours Department Hours Factory Administration Custodial Services... 12 4 5,000 3,000 2,000 Personnel.. Maintenance Machining Assembly. 5 5.000 3,000 10,000 70,000 20,000 25 22,000 30,000 90,000 40 70,000 10,000 20,000 60 80,000 146 150,000 110,000 80,000 100.000 Machining and Assembly e operating departments; the other departments are service departments are Factory Administration is allocated based on labor-hours; Custodial Services based on square feet occupied; Personnel based on number of employees; and Maintenance based on machine-hours. Required Allocate service department costs to consuming departments by the step-down method. Thet bodiene compute predetermined overhead rates in the operating departments using machine-hours as the allocation base in Machining and direct labor-hours as the allocation base in Assembly 2. Repeat (1) above, this time using the direct method. Again compute predetermined overhead rates in Machining and Assembly. 3. Assume that the company doesn't bother with allocating service department costs but simply computes a single plantwide overhead rate that divides the total overhead costs (both ser vice department and operating department costs) by the total direct labor-hours. Compute the plantwide overhead rate. 4 Suppose a job requires machine and labor time as follows: Machining Department Assembly Department...... Machine-Hours Direct Labor-Hours Total hours