Barrel Company's power plant provides electricity for its two operating departments, A and B. The year 2015 budget for the power plant shows:

Actual power plant costs: fixed $132,000, variable $41,400
Budgeted rates are used in the allocation of electricity cost.
Required:
a. Compute the power plant costs allocated to A and B using the single-rate method with budgeted usage as the allocation base.
b. Compute the power plant costs allocated to A and B using the dual-rate method with actual usage as the allocation base for variable costs and budgeted usage as the allocation base for fixed costs.
c. From the standpoint of Departments A and B, what are the two main benefits of the dual-rate method?
d. Calculate the variable overhead efficiency variances for each department. Who would be the appropriate person(s) to provide information on the causes of these variances?

Question

Barrel Company's power plant provides electricity for its two operating departments, A and B. The year 2015 budget for the power plant shows:
  
Actual power plant costs: fixed $132,000, variable $41,400
Budgeted rates are used in the allocation of electricity cost.
Required:
a. Compute the power plant costs allocated to A and B using the single-rate method with budgeted usage as the allocation base.
b. Compute the power plant costs allocated to A and B using the dual-rate method with actual usage as the allocation base for variable costs and budgeted usage as the allocation base for fixed costs.
c. From the standpoint of Departments A and B, what are the two main benefits of the dual-rate method?
d. Calculate the variable overhead efficiency variances for each department. Who would be the appropriate person(s) to provide information on the causes of these variances?

Quizplus · Accepted Answer

The Answer of Barrel Company's power plant provides electricity for its two operating departments, A and B. The year 2015 budget for the power plant shows:
  
Actual power plant costs: fixed $132,000, variable $41,400
Budgeted rates are used in the allocation of electricity cost.
Required:
a. Compute the power plant costs allocated to A and B using the single-rate method with budgeted usage as the allocation base.
b. Compute the power plant costs allocated to A and B using the dual-rate method with actual usage as the allocation base for variable costs and budgeted usage as the allocation base for fixed costs.
c. From the standpoint of Departments A and B, what are the two main benefits of the dual-rate method?
d. Calculate the variable overhead efficiency variances for each department. Who would be the appropriate person(s) to provide information on the causes of these variances?

Barrel Company's Power Plant Provides Electricity for Its Two Operating