Asked by Sabrina Benavides on May 06, 2024
Verified
Mannerman Products, Incorporated, operates an electric power plant which provides all electrical power for the company's Machining and Fabrication departments. Information on kilowatt-hours (kwh) of power usage in these departments for May follow: 
The costs of the electric power plant are all fixed. Budgeted fixed costs for May totaled $60,000 and are determined by peak-period requirements. Actual fixed costs for the month totaled $65,000. The Machining Department requires 60% of the peak-period capacity and the Fabrication Department requires 40%.How much (if any) of the electric power plant's actual fixed costs of $65,000 should not be charged to the other departments?
A) $0
B) $10,000
C) $5,000
D) $15,000
Electric Power Plant
A facility that generates electricity through various energy sources like coal, natural gas, nuclear, solar, or wind power.
Kilowatt-hours
A unit of energy equivalent to one kilowatt of power expended for one hour, commonly used to measure electricity consumption.
Fixed Costs
Fixed charges that stay steady irrespective of the amount of goods produced or sold, such as property leases, payroll, and indemnity costs.
- Calculate the unattributed service department expenses at the end of the fiscal year.
Verified Answer
Peak-period allocation for Machining department = 60%
Peak-period allocation for Fabrication department = 40%
Therefore, the fixed cost to be allocated to each department would be as follows:
Machining department: $60,000 * 60% = $36,000
Fabrication department: $60,000 * 40% = $24,000
Total allocated fixed costs = $60,000
However, the actual fixed costs incurred are $65,000. Therefore, the amount that should not be charged to the other departments would be:
$65,000 - $60,000 = $5,000
Thus, the correct answer is C.
Learning Objectives
- Calculate the unattributed service department expenses at the end of the fiscal year.
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