QUESTION 2) Hannover Manufacturing Company has three service departments and three production departments. The company budgeted its manufacturing overhead (MOH) cost for the upcoming year of 2020 as follows:

	Service Departments Factory Repair and Management Cafeteria Maintenance			Production Departments Cutting Molding F inishing
I. Allocation (in USD)	425,000	375,000	95,000	700,000	920,000	485,000
Space occupied
(m2)	500	1,000	200	3,000	4,500	4,000
Number of
employees	125	55	22	680	150	720
Maintenance
hours	80	50	0	250	400	300

Machine hours		1,200	4,000	800
(mh)
Direct labor hours		3,500	1,800	2,500
(dlh)

The company allocates the MOH costs of Factory Management Department based on space occupied; MOH costs of Cafeteria Department based on number of employees; MOH costs of Repair and Maintenance Department based on maintenance hours.

Predetermined MOH rates are computed by using direct labor hours for the Cutting department; machine hours for the Molding department, and direct labor hours for the Finishing department.

REQUIRED:

1. Complete the second allocation by using Direct Method.
2. Calculate the Predetermined MOH Rates for the three production departments.
3. In the first week of the 2020, the company completed the Job Order SD-125. For this job order, what is the total cost of SD-125, if the primary costs are $187,583.50 in total, and if the following direct labor hours and machine hours were worked in the three production departments for this job order?

DEPARTMENTS	Direct Labor Hours	Machine Hours
Cutting	160	25
Molding	50	120
Finishing	95	12

4. Compute the cost of this Job Order, if the second allocation is made by using Step- down Method.
5. Now compare the results and give an advice to the management, which of the methods would be more appropriate for this company and why?