Celestial Artistry Company is developing departmental overheadrates based on direct-labor hours for its two productiondepartments, Etching and Finishing. The Etching Department employs20 people and the Finishing Department employs 80 people. Eachperson in these two departments works 2,000 hours per year. Theproduction-related overhead costs for the Etching Department arebudgeted at $200,000, and the Finishing Department costs arebudgeted at $320,000. Two service departments, Maintenance andComputing, directly support the two production departments. Theseservice departments have budgeted costs of $48,000 and $250,000,respectively. The production departments’ overhead rates cannot bedetermined until the service departments’ costs are allocated. Thefollowing schedule reflects the use of the Maintenance Department’sand Computing Department’s output by the various departments.
| Using Department |
| Service Department | Maintenance | | Computing | | Etching | | Finishing |
| Maintenance (maintenance hours) | 0 | | | 1,000 | | | 1,000 | | | 8,000 | |
| Computing (minutes) | 240,000 | | | 0 | | | 840,000 | | | 120,000 | |
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- Use the step-down method to allocate service department costs.Allocate the Computing Department’s costs first. Calculate theoverhead rates per direct-labor hour for the Etching Department andthe Finishing Department. (Do not round intermediatecalculations. Round "Overhead rate per hour" to 3decimal places and other answers to the nearest dollaramount.)
