Jets Corporation is also developing overhead rates based on direct labour hours for its two production departments, Mixing and Packaging. The Mixing Department employs 50 people and the Packaging Department employs 30 people. Each person in these two departments works 2,000 hours per year. The production related overhead costs for the Mixing Department are budgeted at $300,000, and the Packaging Department costs are budgeted at $500,000. Two service departments, Maintenance and Computing, directly support the two production departments. These service departments have budgeted costs of $50,000 and $200,000, respectively. The production departments’ overhead rates cannot be determined until the service departments’ costs are allocated. The following schedule reflects the use of the Maintenance Department’s and Computing Department’s output by the various departments. Using Departments Service Department Maintenance Computing Mixing Packaging Maintenance (maintenance hours) 0 1,000 1,000 8,000 Computing (minutes) 240,000 0 840,000 120,000 Required: d. Use the direct method to allocate service department costs (round to the nearest dollar). Calculate the overhead rates per direct labour hour for the Mixing Department and Packaging Department (round to two decimal places). e. Use the step-down method to allocate service department costs (round to the nearest dollar). Calculate the overhead rates per direct labour hour for the Mixing Department and Packaging Department (round to two decimal places).
