$$This is really an odd situa$1.$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

tion,$$ said Nancy Reagan, general manager of Capital View Publishing Company. $$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 much time in the Binding Department. I would be inclined to think that the problem is with our overhead rates, but we are already computing separate overhead rates for each department. So$,$ what else could be wrong?$$ Capital View Publishing Company is a large organization that offers a variety of printing and binding work. Three service departments support the Printing and Binding departments. The costs of these service departments are allocated to other departments in the order listed below. The Personnel cost is allocated based on the number of employees. The Custodial Services cost is allocated based on square feet of space occupied, and the Maintenance cost is allocated based on machine$-$hours. Budgeted overhead costs in each department for the current year are shown below: Because of its simplicity, the company has always used the direct method to allocate service department costs to the two operating departments Department Personnel Custodial Services Maintenance Printing Binding Square Feet of Space Occupied $4,0006,00020,00080,00040,000150,000$ Number of Employees $10152540120210$ MachineHours $150,00030,000180,000$ Direct LaborHours $60,000175,000235,000$ Total Labor$-$Hours $20,00030,00050,00090,000260,000450,000$ Personnel Custodial Services Maintenance Printing Binding Total budgeted cost $ $360,000141,000201,000525,000373,500$ $$1,600,500431.$ Determine the overhead cost 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. $2.$ Explain to Mr$.$ Carter, the general manager, why the step$-$down method provides a better basis for computing predetermined overhead rates than the direct method. PROBLEM $2\_$IC: PLANTWIDE AND DEPARTMENTAL PREDETERMINED OVERHEAD RATES; OVERHEAD APPLICATION Sunset Company has two manufacturing departments $$ Assembly and Fabrication. It considers all of its manufacturing overhead costs to be fixed costs. The first data set below is based on estimates from the beginning of the year. The second data set relates to one particular job completed during the year $$ Job Bravo. 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