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Maricopa Corporation is developing departmental overhead rates based on direct labor hours for its two production departments, Molding and Assembly. The molding department employs 20
Maricopa Corporation is developing departmental overhead rates based on direct labor hours for its two production departments, Molding and Assembly. The molding department employs 20 people, and the assembly department employs 80 people. Each person in these two departments works 2,000 hours per year. The production-related overhead costs for the molding department are budgeted at $200,000, and the assembly department costs are budgeted at $320,000. Two support departments; Repair and Power, directly support the two production departments and have budgeted costs of $48,000 and $250,000, respectively. The production departments' overhead rates cannot be determined until the support departments' costs are properly allocated. The following schedule reflects the use of the repair departments and power department's output by the various departments. Repair hours Kilowatt-hours Repair NA 240,000 Power 1,000 NA Molding 1,000 840,000 Assembly 8,000 120,000 Required: 1. Calculate the overhead rates per direct labor hour for the molding department and the assembly department using the step-down method to charge support department costs to each other and to the production departments. The allocation policy is firstly allocate the service department with the highest percentage of interdepartmental support.(10 points) 2. Calculate the overhead rates per direct labor hour for the molding department and the assembly department using the reciprocal method to charge support department costs to each other and to the production departments. (10 points)
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