"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 we're 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 occupled and the Maintenance cost is allocated based on machine-hours Direct Labor- Hours Machine-Hours Department Personnel Custodial Services Maintenance Printing Binding Total Labor- Square Feet of Hours Space Occupied 16,100 12, 100 8,700 3, 2ee 14,500 12,5ee 38,688 40, 700 109, eee 21, eee 178,982 87,500 Number of Employees 27 41 64 100 307 539 161, eee 40, eee 201, eee 14,000 79,000 93,000 Budgeted overhead costs in each department for the current year are shown below: Personnel Custodial Services Maintenance Printing Binding Total budgeted cost $ 310, eee 65,900 94,000 418,000 169,000 $1,056,900 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 Printing Department Binding Department Total hours Machine Hours 2,900 Goe 3, see Direct Labor-Hours 1,100 13,800 14,982 o. 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. Printing Binding Total budgeted cost 418,000 169,000 $1,856,980 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 departme Then compute predetermined overhead rates in the two operating departments. Use machine-ho 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 ra the Printing and Binding departments, 3. Assume that during the current year the company bids on a job that requires machine and labor as follows: Printing Department Binding Department Total hours Machine-Hours 2,900 bee 3,500 Direct Labor-Hours 1,1ee 13,800 14,900 a. Determine the amount of overhead cost that would be assigned to the job if the company used 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. Reg 1 Reg 2 Req 3A Using the step-down method, allocate the service department costs to the consuming departments. The overhead rates in the two operating departments. Use machine-hours as the allocation base in the Print hours as the allocation base in the Binding Department. (Please enter allocations from a department as department as positive. The line should add across to zero. Do not round intermediate calculations. Roum rate" to 2 decimal places and rest of the answers to the nearest whole dollar amount.) Personnel Custodial Maintenance Printing Services $ 310,000 $ 65,900 $ 94,000 $ 418.000 Departmental costs before allocations Allocations Personnel costs Custodial services costs Maintenance costs Total costs after allocations Predetermined overhead rate 310,000 65,900 94,000 418,000 R