Need an accurate answer ASAP "This is really an odd situation," said Jim Carter, general manager of Highland Publishing Company. "We get most of the jobs we bid onthat 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 otherhand, 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 theproblem is with our overhead rates, but we're already computing separate overhead rates for each department. So what else could bewrong?"Highland Publishing Company is a large organization offering a variety of printing and binding work. The Printing and Bindingdepartments are supported by three service departments. The costs of these service departments are allocated to other departmentsin the order listed below. The Personnel cost is allocated based on number of employees. The Custodial Services cost is allocatedbased on square feet of space occupied and the Maintenance cost is allocated based on machine-hours.DepartmentPersonnelCustodial Services.MaintenancePrintingBindingPersonnelCustodial ServicesMaintenanceTotal Labor-Hours16,7008,90014,400PrintingBindingTotal budgeted cost30, 100106,000176, 100Square Feet ofSpace Occupied12,9003,10010,80040,40020,30087,500Number ofEmployees294761107306550Machine- Direct Labor-HoursHoursBudgeted overhead costs in each department for the current year are shown below:$ 330,00065,10093,600420,000162,000$ 1,070,700164,00045,000209,00013,00074,00087,000Because of its simplicity, the company has always used the direct method to allocate service department costs to the two operatingdepartments.Required: Required:1. Using the step-down method, allocate the service department costs to the consuming departments. Then compute predeterminedoverhead rates in the two operating departments. Use machine-hours as the allocation base in the Printing Department and directlabor-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 Bindingdepartments.3. Assume during the current year the company bids on a job requiring machine and labor time as follows:Printing DepartmentBinding DepartmentTotal hoursMachine-Hours2,5007003,200a. Calculate the overhead cost assigned to the job if the company used the overhead rates developed in (1) above. Then calculate theoverhead cost 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.Required 1 Required 2 Required 3ADirect Labor-Hours1,40013,20014,600Using the step-down method, allocate the service department costs to the consuming departments. Then compute predeterminedoverhead 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.Note: Please enter allocations from a department as negative and allocations to a department as positive. The line should add across tozero. Do not round intermediate calculations. Round "Predetermined overhead rate" to 2 decimal places and rest of the answers to thenearest whole dollar amount.Departmental costs before allocationsAllocations:Personnel costsPersonnelCustodialServices$ 330,000 $(330,000)BindingPrinting65,100 $ 93,600 $ 420,000 $ 162,000PrevMaintenance1 of 3Next >Show less

Predetermined overhead rate - Printing = Total overhead cost after allocations / Machine…

"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 offering 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 Personnel Custodial Services Maintenance Printing Binding Personnel Custodial Services Maintenance Total Labor- Hours 16,700 8,900 Printing Binding Total budgeted cost 14,400 30,100 106,000 176, 100 Square Feet of Space Occupied 12,900 3,100 10,800 40,400 20,300 87,500 Budgeted overhead costs in each department for the current year are shown below: $ 330,000 65,100 93,600 Number of Employees 29 47 61 107 306 550 420,000 162,000 $ 1,070,700 Machine- Direct Labor- Hours Hours 164,000 45,000 209,000 13,000 74,000 87,000 Because of its simplicity, the company has always used the direct method to allocate service department costs to the two operating departments.

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter10: Standard Costing And Variance Analysis

Section: Chapter Questions

Problem 51E: Jackie Iverson was furious. She was about ready to fire Tom Rich, her purchasing agent. Just a month...