Case 4B-6 (Algo) Step-Down Method versus Direct Method [LO4-10, LO4-11] "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 organzation 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. Budgeted overhead costs in each department for the current year are shown below Becouse 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 alocation base in the Printing Department and direct labor-hours as the allocation base in the Binding Department. 2 Repeat (f) above, this time using the direct method. Again compute predetermined overhead tates 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 Calculate the overhead cost assigned to the job if the company used the overthead rates developed in (1) above Then calculate the cverthead cost assigned to the fob if the company used the overhead rates developed in (2) above Complete this question by entering your answers in the tabs below. Using the step-down method, allocate the service department costs to the consuming departments. Then compute predetermined overhead rates in the two operating dopartments. Use macthine-hours as the allocation base in the Printing Department and direct. Iabor hours as the allocation base in the Binding Department. Mote: please enter aliocations from a department as negative and allocutions to a department as positive. The llme showid add across to zero. Do not round intermedate calculabions, Round "predetermined overhead rate" to 2 decimal places and rest of the answers to the nearest whole dotiar amount Shove leasa Complete this question by entering your answers in the tabs below. Repeat requirement 1 above, this time using the direct method. Again compute predetermined overhead rates in the Printing and Binding departments. Note: Please enter allocations from a department as negative and Jllocations to a department as popitive. 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: departments Required: 1. Using the step-down method, allocate the service department costs to the consuming departinents. Then compute predetermined overhead rates in the two operating departments. Use machine hours as the alocation base in the Printing Departinent and direct labor-hours as the allocation base in the Binding Department 2. Repeat (t) 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 tequiring machine and labor time as follows. a. Calculate the overhead cost assigned to the job the company used the overhead rates developed in (t) above Then calculate the overthead 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. Calculate the overhesd cost assigned to the job if the company usad the ovemead rates developed in requirement 1 above. Then calculate the overhesd cost assigned to the job if the company used the overtuead rates developed in requirement? Notei flound your incernediate calculations to 2 decimal places and final ancwers to the nearest whole doliar amount