Company\'s power plant provides electricity to two producing departments. The an

Question

Company's power plant provides electricity to two producing departments. The annual budget for the power plant shows the following: Budgeted fixed costs $500,000 Budgeted variable costs per kilowatt hour $1 Actual annual costs incurred by the power plant were: Actual fixed costs $215,000 Actual variable costs $350,000 Additional annual data follows: Producing Department 1 Producing Department 2 Capacity available 250,000 kilowatt hours 150,000 kilowatt hours Capacity used 270,000 kilowatt hours 165,000 kilowatt hours Required:

A) Compute the amount of fixed costs allocated to each producing department. B) Compute the amount of variable costs allocated to each producing department.

Explanation / Answer

Department 1 Department 2 Actual Killowatt hours used 270000 165000 Available capacity 250000 150000 Fixed cost applied (actual hours used x predetrmined rate) $ 2,70,000.00 $ 1,65,000.00 Fixed cost applied (in the ratio of actual hours used that is 270000: 165000 to dept 1 and 2) $ 2,17,242.00 $ 1,32,758.00

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