"This is really an odd situation," said Jim Carter, general manager of Highland Publishing Company. "We get most of the

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This Is Really An Odd Situation Said Jim Carter General Manager Of Highland Publishing Company We Get Most Of The 1 (206.34 KiB) Viewed 6 times

"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 Personnel Custodial Services Maintenance Printing Binding Total budgeted cost Total Labor- Square Feet of Number of Space Occupied Employees 12,700 29 3,900 47 10,300 60 40,500 105 20,000 307 87,400 548 Hours 16,400 8,200 14,600 30,600 101,000 170,800 Budgeted overhead costs in each department for the current year are shown below: Printing Department Binding Department Total hours $ 340,000 65,700 93,600 410,000 169,000 $ 1,078,300 Machine-Hours 2,900 700 3,600 Machine- Hours 165,000 47,000 212,000 Direct Labor- Because of its simplicity, the company has always used the direct method to allocate service department costs to the two operating departments. Hours 1,300 13,000 14,300 Direct Labor- 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: Hours 16,000 74,000 90,000
Req 1 Req 2 Req 3A 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. (Please enter allocations from a department as negative and allocations to a department as positive. The line should add across to zero. Do not round intermediate calculations. Round "Predetermined overhead rate" to 2 decimal places and rest of the answers to the nearest whole dollar amount.) Dep mental costs before allocations Allocations: Personnel costs Custodial services costs Maintenance costs Total costs after allocations Predetermined overhead rate Personnel $ 340,000 (340,000) 0 0 0 < Req 1 Custodial Services $ 65,700 $ 30,790 (96,490) Maintenance Printing 0 93,600 $ 410,000 $ 39,306 132,906 Req 2 > 410,000 Binding 169,000 169,000 Show less A
Req 1 Req 2 Repeat requirement 1 above, this time using the direct method. Again compute predetermined overhead rates in the Printing and Binding departments. (Please enter allocations from a department as negative and allocations to a department as positive. The line should add across to zero. Do not round intermediate calculations. Round "Predetermined overhead rate" to 2 decimal places and rest o the answers to the nearest whole dollar amount.) Req 3A Departmental costs before allo tions Allocations: Personnel costs Custodial services costs Maintenance costs Total costs after allocations Predetermined overhead rate Personnel 340,000 340,000 < Req 1 Custodial Services $ Maintenance Printing 65,700 $ 65,700 93,600 $ 93,600 Binding 410,000 $ 169,000 Req 3A 410,000 169,000 Show less A
nours a. 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. Req 1 Req 2 Step-down method Direct method Req 3A Determine the amount of overhead cost that would be assigned to the job if the company used the overhead rates developed in requirement 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 requirement 2. (Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.) Total Overhead Cost < Req 2 Req 3A Show less A