(Answered) Question - a company has 2 service departments power and

Accounting

Question - A company has 2 service departments, Power and Maintenance and 2 production departments, Machining and Assembly. All costs are regarded as strictly variable. For September the following information is available:

Service Depts Production Depts

Power Maint Machining Assembly

Direct Costs 62,500 40,000 25,000 15,000

Actual activity

Kilowatt hrs 50,000 150,000 50,000

Maint Hrs 250 1,125 1,125

Assume the company uses the step method for allocating service department costs to production departments. The company begins with the service department which receives the least service departments. What dollar amount of Power Department costs will be allocated to the Maintenance Department for September?

a- $0

b- $8,000

c- $6,250

d- $12,500

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