PROBLEM 4 Thermal Corporation has two producing department and two service departments labelled P1, P2, S1, S2 respectively. Direct costs for each department and the proportion of service costs used by various departments are as follows: Cost Center Proportion of services used by: Direct Costs P1 P2 S1 S2 P100,000 P50, 000 P15,000 P25,000 S1 10% S2 60% P1 30% 50% P2 10% 40% In calculating predetermined overhead rates, machine hours are used as the base in P1 and direct labor hours as the base in P2. P1 P2 Machine hours Direct labor hours 50,000 40,000 40,000 20,000 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 - start with S1 c. Algebraic method