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 were 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.

Total Labor Square Feet of Number of Direct Labor- Hours Department Personnel Custodial Services Maintenance Printing Binding Hours 16,900 8,400 15,000 30,500 1ee,000 170,800 Space Occupied Employees Machine-Hours 29 49 62 107 303 550 12,200 3,300 10,300 40,400 20,70e 86,90e 169,900 44,000 213,e00 13,e00 75,000 88,000 Budgeted overhead costs in each department for the current year are shown below: Personnel Custodial Services Maintenance Printing Binding Total budgeted cost $300,e00 66,000 93,400 414,00e 161,000 $ 1,034,40 Because of its simplicity, the company has always used the direct method to allocate service department costs to the two operating departments KPrev2 of 3Next> Saved Help Save & Exit Submit Requirec 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 Direct Labor-Hours 1,400 13,300 14,700 Machine-Hours 2,600 Printing Department Binding Department Total hours 800 3,480 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. Saved Help Save & E Req 1 Req 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 lin 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 Services Personnel Maintenance Printing Binding Departmental costs before allocations Allocation 300,000 $ 66,000$ 93,400$ 414,000161,000 Personnel Custodial services Maintenance (300,000) (66,000) (93,400) Total costs after allocations 414,000 161,000 Predetermined overhead rate