Problem $5$

Eastern Corporation has two producing department and two service departments

labeled P$1,$ P$2,$ S$1,$ and S$2,$ respectively. Direct costs for each department and the

proportion of services costs used by various departments are as follows:

In calculating predetermined overhead rates, machine hours are used as the base in PI

and direct labor hours as the base in P$2.$

Requirements: $$

Allocate the service department costs to operating departments and compute the

factory overhead rate for P$1$ and P$2$ using the following methods:

A$.$ Direct Method

b$.$ Step method $-$ start with SI

c$.$ Algebraic method