. Rate Calculation—Plantwide versus Departmental Direct Method. East Tennessee Company uses the direct method in allocating service department costs to producing departments. Costs of Department SI are allocated on the basis of number of employees, while costs of Department S2 are allocated on the basis of machine hours. The allocation bases used in calculating predetermined overhead rates are machine hours in Department PI and direct labor hours in Department P2.

Producing Departments Service Departments PI P2 SI S2 Budgeted factoryoverhead. $410,000 $304,000 $100,000 $50,000 Number ofemployees. 90 210 20 28 Machinehours. 64,000 16,000 Direct laborhours. 35,000 100,000 The following data pertain to Job 437:

Department PI Department P2 Materialscost. $90 $40 Direct laborhours. 1 2 Machinehours. 3 1 Required:

(1) Calculate predetermined factory overhead rates for the producing departments and compute the result¬ ing overhead cost of Job 437.

(2) Calculate a plantwide predetermined factory overhead rate based on direct labor hours and compute the resulting overhead cost of Job 437. CGA-Canada (adapted). Reprint with permission.