"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 Total Labor- Hours Square Feet of Space Occupied Number of Employees Machine- Hours Direct Labor- Hours Personnel 16,500 12,800 28 Custodial Services 8,600 3,800 49 Maintenance Printing 14,100 10,400 63 30,700 40,300 101 164,000 15,000 Binding 109,000 20,300 301 50,000 77,000 178,900 87,600 542 214,000 92,000 Budgeted overhead costs in each department for the current year are shown below: Personnel Custodial Services Maintenance $ 330,000 65,100 93,700 Printing Binding Total budgeted cost 412,000 168,000 $ 1,068,800 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 during the current year the company bids on a job requiring machine and labor time as follows: