Determine the departmental overhead rate

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Reference no: EM132768092

Problem - Departmental OH rate after allocation of service cost

Nissan Manila is developing departmental overhead rates based on direct lab hours for its two production departments, Assembly and Finishing after service costs are distributed. The Assembly Department employs 20 people and 8 people for Finishing Department. Each person in these two departments work 2,000 hours per year. The direct overhead costs for the Assembly Department are budgeted at P2,040,000 while the Finishing Department costs are budgeted at P3,200,000. Two service departments, Repair and Power, support the two production departments and have budgeted costs of P480,000 and P1,250,000, respectively. The following data shown below reflect the usage of Repair and Power Department:

Departments	Services provided by
Departments	Repair Department	Power Department
Assembly Department	1,000 hours	840,000 KWH
Finishing Department	8,000 hours	120,000 KWH
Repair Department	-	240,000 KWH
Power Department	1,000 hours	-

Required - Determine the Departmental Overhead rate assuming the service department costs is allocated using

1. Direct method.

2. Step method

3. Algebraic method

Reference no: EM132768092

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