Refer to the data given in Problem 18-24 for Glass Creations Company.

Required:

1. Calculate the overhead rates per direct-labor hour for the Etching Department and the Finishing Department. Use the reciprocal-services method to allocate service department costs.
2. Which of the three methods of service department cost allocation results in the most accurate overhead rates? Why?

Data From Problem 18-24:-

Glass Creations Company is developing departmental overhead rates based on direct-labor hours for its two production departments. Etching and Finishing. The Etching Department employs 20 people and the Finishing Department employs 80 people. Each person in these two departments works 2,000 hours per year. The production-related overhead costs for the Etching Department are budgeted at $400,000, and the Finishing Department costs are budgeted at $640,000 . Two service departments, Maintenance and Computing, directly support the two production departments. These service departments have budgeted costs of $96,000 and $500,000 , respectively. The production departments' overhead rates cannot be determined until the service departments' costs are allocated. The following schedule reflects the use of the Maintenance Department's and Computing Department's output by the various departments.

Transcribed Image Text:

Using Department Service Department Maintenance Computing Etching Finishing Maintenance (maintenance hours). 0 1,000 1,000 8,000 Computing (minutes).. 240,000 0 840,000 120,000