Departmental Distribution of Estimated Overhead—Step Method; Rate Calculation. The Nickey Company uses the step method in allocating the costs of its two service departments, SI and S2, to its two producing departments, PI and P2. SI is allocated first on the basis of number of employees. S2 is allocated on the basis of machine hours. Departmental overhead rates are based on machine hours in PI and direct labor hours in P2. The following budget data are available:

SI S2 PI P2 Budgetedoverhead. $10,000 $34,750 $200,000 $300,000 Number ofemployees. 15 10 180 210 Machinehours. 4,000 3,000 Direct laborhours. 5,000 10,000 Required:

(1) Develop predetermined overhead rates for the producing departments.

(2) If Nickey Company decides to change to a plantwide rate based on direct labor hours, what will that rate be?

(3) Why are separate departmental rates preferable to a single plantwide rate?