Problem 4B-6 Step-Down Method versus Direct Method; Predetermined Overhead Rates (LO4-10, LO4- 11) The Sendai Co., Ltd., of Japan has budgeted costs in its various departments as follows for the coming year: Factory Administration Custodial Services Personnel Maintenance Machining-overhead Assembly-overhead Total cost $ 613,900 111, 120 81,795 133, 775 1,248, 050 607,860 $2,796,500 The company allocates service department costs to other departments in the order listed below. 31 200 - Department Factory Administration Custodial Services Personnel Maintenance Machining Assembly Square Total Feet of Direct Number of Labor Space Labor- Machine- Employees Hours Occupied Hours Hours - 10,200 9,600 7,800 15 16,500 8,500 56 44,700 18,100 120,000 60,000 55,000 205,000 160,000 20,000 195,000 41,000 350, 800 124,600 250,000 246,000 50 Machining and Assembly are operating departments; the other departments are service departments. 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: 1. Allocate service department costs to consuming departments by the step-down method. Then 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 service 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: Machine- Hours 220 Direct Labor- Hours 30 80 Machining Department Assembly Department Total hours 18 238 110 Using the overhead rates computed in (1), (2), and (3) above, compute the amount of overhead cost that would be assigned to the job if the overhead rates were developed using the step-down method, the direct method, and the plantwide method