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.

Department	Total Labor-Hours	Square Feet of Space Occupied	Number of Employees	Machine-Hours	Direct Labor-Hours
Personnel	16,100	12,400	26
Custodial Services	8,100	3,100	49
Maintenance	14,400	10,100	67
Printing	30,600	40,300	109	167,000	16,000
Binding	102,000	20,800	304	45,000	74,000
	171,200	86,700	555	212,000	90,000

Budgeted overhead costs in each department for the current year are shown below:

Personnel	$ 330,000
Custodial Services	66,000
Maintenance	93,700
Printing	420,000
Binding	170,000
Total budgeted cost	$ 1,079,700

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:

	Machine-Hours	Direct Labor-Hours
Printing Department	2,100	1,300
Binding Department	400	13,500
Total hours	2,500	14,800

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.

Req 1 Req 2 Using the step-down method, allocate the service department costs to the consuming departments. Then compute predet overhead rates in the two operating departments. Use machine-hours as the allocation base in the Printing Department an hours as the allocation base in the Binding Department. (Please enter allocations from a department as negative and alloc department as positive. The line should add across to zero. Do not round intermediate calculations. Round "Predetermined rate" to 2 decimal places and rest of the answers to the nearest whole dollar amount.) Req 3A Departmental costs before allocations Allocations: Personnel costs Custodial services costs Maintenance costs Total costs after allocations Predetermined overhead rate Personnel Custodial Services Printing Binding $ 330,000 $ 66,000 $ 93,700 $ 420,000 $ 170,000 330,000 420,000 170,000 Req 1 Req 2 Repeat requirement 1 above, this time using the direct method. Again compute predetermined overhead rates in the Printi Binding departments. (Please enter allocations from a department as negative and allocations to a department as positive. should add across to zero. Do not round intermediate calculations. Round "Predetermined overhead rate" to 2 decimal place the answers to the nearest whole dollar amount.) Req 3A Departmental costs before allocations Allocations: Personnel costs Custodial services costs Maintenance costs Total costs after allocations Predetermined overhead rate Custodial Services Maintenance Printing Binding $ 330,000 $ 66,000 $ 93,700 $ 420,000 $ 170,000 Personnel 330,000 420,000 170,000 Req 1 Req 2 Step-down method Direct method Req 3A Determine the amount of overhead cost that would be assigned to the job if the company used the overhead rates develope in requirement 1 above. Then determine the amount of overhead cost that would be assigned to the job if the company user the overhead rates developed in requirement 2. (Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.) Total Overhead Cost Show less