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 Departments and Computing Departments output by the various departments.

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

Use the step-down method to allocate service department costs. Allocate the Computing Departments costs first. Calculate the overhead rates per direct-labor hour for the Etching Department and the Finishing Department.

	Service Dept.	Service Dept.	Production Dept.	Production Dept.
	Computing	Maintence	Etching	Finsihing
Costs Prior to Allocation
Allocation of Computing Dept Costs
ALlocation of Maitnence Dept. Costs
Total Service Dept. Costs Allocated
Overhead Costs Traceable to production Dept.
Total Overhead Costs
Direct Labor Hours
Overhead Rate per Hour