Hulinghehe Manufacturing Corp. has two operating departments, Dept.HA and Dept. PE and two support departments: UTILITIES and PERSONNEL. Budgeted overhead costs for the year and other statistical information follows: Overhead Cost Operating Dept. HA PE Service Dept. Utilities Personnel P 800,000 600,000 300,000 200,000 Personnel Space Occupied Processed Cost Driver 60,000 sq.ft. 30,000 sq.ft. 5,000 sq. ft. 10,000 sq. ft. 800 600 Machine hour Direct labor hours 100 Square footage 50 #personnel processed Department HA budgeted 20,000 machine hours for the year, while Department PE budgeted 15,000 direct labor hours. Required: a. Allocate the cost of service departments to operating departments using Step- method and compute the overhead rate per hour.for HA and PE b. Allocate the cost of service departments to operating departments using Reciprocal method and compute for the overhead rate per hour for HA and PE

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Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit.  Overhead expenses depend upon the nature of the business operations.