Departmental Distribution of Estimated Overhead—Step Method; Rate Calculation. The Nettleville Mixing Company has two producing departments, Mixing and Finishing, and two service departments, Cafeteria and Product Design. The company assigns service department costs to other service departments; however, after a department’s costs have been allocated, no costs are assigned back to it. Cafeteria is allocated first, based on the number of employees, and Product Design is allocated based on the number of product orders. In calculat¬ ing predetermined factory overhead rates, machine hours are used as the basis in both producing departments.

The following estimated data are provided:

Product Cafeteria Design Mixing Finishing Budgetoverhead. $10,000 $50,000 $100,000 $200,000 Number ofemployees... 10 5 65 130 Number of productorders. 100 200 Machinehours. 40,000 60,000 Required: Develop predetermined factory overhead rates for the Mixing and Finishing departments.

CGA-Canada (adapted). Reprint with permission.