Thermal Corporation has two producing departments and two service departments labeled P1, P2, S1, S2...
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Accounting
Thermal Corporation has two producing departments and two service departments labeled P1, P2, S1, S2 respectively. Direct costs for each department and the proportion of service costs used by various departments are as follows:
Cost Center
Direct Costs
Proportion of services used by:
S1
S2
P1
P2
P1
P100, 000
P2
P50, 000
S1
P15, 000
-
60%
30%
10%
S2
P25, 000
10%
-
50%
40%
In calculating predetermined overhead rates, machine hours are used as the base in P1 and direct labor hours as the base in P2
P1
P2
Machine Hours
50,000
40,000
Direct Labor Hours
40,000
20,000
Requirements:
Allocate the service department costs to operating departments and compute the factory overhead rate for P1 and P2 using the following methods:
Direct method
Step method start with S1
Algebraic method
*Reposting this question again, because it has been answered incorrectly many times.
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