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 $ 490, 590 158, 312 38,593 132,075 1,114,572 933, 458 $2,867,600 The company allocates service department costs to other departments in the order listed below. 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 27 5,500 9 11,600 9,700 19 19,900 8,300 60 51, 900 12,000 76 112,000 90,000 120,000 180,000 114 168,000 30,000 226,000 30,000 305 363, 400 155,500 346,000 210,000 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: 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 $ 490, 590 158, 312 38,593 132,075 1,114,572 933, 458 $2,867,600 The company allocates service department costs to other departments in the order listed below. 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 27 5,500 9 11,600 9,700 19 19,900 8,300 60 51, 900 12,000 76 112,000 90,000 120,000 180,000 114 168,000 30,000 226,000 30,000 305 363, 400 155,500 346,000 210,000 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