Problem 5 Thermal Corporation has two producing department and two service departments labeled PI. P2, $1, and $2, respectively. Direct costs for cach department and the proportion of services costs used by various departments are as follows: Cost Direct Proportion of services used by: Center Costs SI $2 PI P2 PI P 90.000 P2 60,000 20.000 80 10 $2 32,000 20 50 30 In calculating prodetermined overhead rates, machine hours are used as the base in PI and direct labor hours as the base in P2 PI P2 Machine hours 50 000 40.000 Direct labor hours 40 000 20.000 Requirements 1. Allocate the service department costs to operating departments and compute the factory overhead rate for PI and P2 using the following methods: A. Direct Method b. Stop method - start with SI C. Algebraic method 2. Assume the company use, just one basis for applying overhead to jobs going direct labor hours as