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Thermal Corporation has two producing department and two service departments labeled P1, P2, $1, and $2, respectively. Direct costs for each department and the
Thermal Corporation has two producing department and two service departments labeled P1, P2, $1, and $2, respectively. Direct costs for each department and the proportion of services costs used by various departments are as follows: COST CENTER DIRECT COSTS PROPORTION OF SERVICES USED BY: $1 $2 P1 P2 P1 90,000.00 P2 60,000.00 $1 $2 20,000.00 32,000.00 0.80 0.10 0.20 0.50 0.10 0.30 In calculating predetermined overhead rates, machine hours are used as the base in P1 and direct labor hours as the base in P2. MACHINE HOURS DIRECT LABOR HOURS P1 50,000.00 40,000.00 P2 40,000.00 20,000.00 REQUIREMENTS: Allocate the service department costs to operating departments and compute the factory overhead rate for P1 and P2 using the following methods: A DIRECT METHOD B STEP METHOD C ALGEBRAIC METHOD 2 Assume the company uses one basis for applying overhead to jobs going through both P1 and P2, compute the overhead rate using direct labor hours as base
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