Mannerman Products, Inc., 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%.
For performance evaluation purposes, how much of the electric power plant's fixed costs should be charged to the Fabrication department at the end of the month for purposes of evaluating performance?

Question

Mannerman Products, Inc., 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%.
For performance evaluation purposes, how much of the electric power plant's fixed costs should be charged to the Fabrication department at the end of the month for purposes of evaluating performance?

Quizplus · Accepted Answer

Fixed charges = Percentage of peak--period capacity required × Budgeted fixed cost
= 40% × $60,000 = $24,000