"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 occupied and the Maintenance cost is allocated based on machine-hours. Department Personnel Custodial Services Maintenance Printing Binding Total Labor- Hours 16,500 8,300 Personnel Custodial Services. Maintenance Printing Binding Total budgeted cost 14,600 30,100 104,000 173,500 Square Feet of Space Occupied 12,100 3,500 10,300 40,200 20,000 86,100 Number of Employees 23 41 67 103 306 540 $ 310,000 65,300 93,900 414,000 170,000 $ 1,053,200 Machine- Direct Labor- Hours Budgeted overhead costs in each department for the current year are shown below: 163,000 47,000 210,000 Hours 19,000 76,000 95,000 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: