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 hoursPredetermined overhead rate - Binding = Total overhead cost after allocations / Labor hoursOverhead cost assigned to job = (Machine hours of printing* overhead rate per machine hour) + (Labor hours of binding* Overhead rate per direct labor hour)Allocation of overhead costs to consuming department using step method and computation of overhead rate PersonnelCustodial servicesMaintenancePrintingBindingTotal cost before allocations$3,30,000$65,100$93,600$4,20,000$1,62,000Allocation: Personnel (47:61:107:306)-$3,30,000$29,770$38,637$67,774$1,93,820 Custodial (10800:40400:20300)-$94,870$14,330$53,605$26,935 Maintenance (164000:45000)-$1,46,567$1,15,010$31,558Total Overhaed Cost after allocations$6,56,388$4,14,312Divide by machine-hours164000Divide by direct labor-hours74000Predetermined Overhead rate$4.00$5.60Allocation of overhead costs to consuming department using direct method and computation of overhead rate PersonnelCustodial servicesMaintenancePrintingBindingTotal cost before allocations$3,30,000$65,100$93,600$4,20,000$1,62,000Allocation: Personnel (107:306)-$3,30,000$85,496$2,44,504 Custodial (40400:20300)-$65,100$43,329$21,771 Maintenance (164000:45000)-$93,600$73,447$20,153Total Overhaed Cost after allocations$6,22,272$4,48,428Divide by machine-hours164000Divide by direct labor-hours74000Predetermined Overhead rate$3.79$6.06Computation of overhead cost assigned to job is as under: Step Down Method:PrintingBindingTotalMachine Hours2500Direct labor hours13200*Predetermined Overhead rate$4.00$5.60Overhead assigned to Job$10,000$73,920Total overhead cost (step down method)$83,920Direct mathod:PrintingBindingTotalMachine Hours2500Direct labor hours13200*Predetermined Overhead rate$3.79$6.06Overhead assigned to Job$9,475$79,992Total overhead cost (Direct method)$89,467Summary of final answerPrintingBindingTotal1Total Overhead Cost after allocations$6,56,388$4,14,312Predetermined Overhead rate$4.00$5.602Total Overhead Cost after allocations$6,22,272$4,48,428Predetermined Overhead rate$3.79$6.063Total overhead cost (step down method)$83,920Total overhead cost (Direct method)$89,467