Madison Corporation is developing departmental overhead rates based on direct labor hours for its two production departments, Molding and Assembly. The Molding Department employs 20 people, and the Assembly Department employs 80 people. Each person in these two departments work 2,000 hours per year. The production-related overhead costs for the Molding Department are budgeted at $200,000, and the Assembly Department costs are budgeted at $320,000. Two service departments, Repair and Power, support the two production departments and have budgeted costs of $48,000 and $250,000, respectively. The production departments' overhead rates cannot be determined until service departments' costs are distributed. The following schedule reflects the use of the Repair Department's and Power Department's output by the various departments.

Required:
(1) Calculate the overhead rates per direct labor hour for the two producing departments, distributing service department costs to producing departments only. (Round rates to the nearest cent.)
(2) Calculate the overhead rates per direct labor hour for the two producing departments, using the simultaneous method to distribute service department costs. (Round rates to the nearest cent.)
(3) Explain the difference between the methods and provide arguments to support the simultaneous method.

Transcribed Image Text:

Services Provided Department KWH Molding..1,000 Assembly Repair Power Repair Hours 8,000 1,000 840,000 120,000 240,000 c.. 10,000 1,200,000