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

Question

Robert 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-Capacity available =250,000 kilowatt hours

Producing Department 1-Capacity used = 270,000 kilowatt hours

Producing Department 2-Capacity available =150,000 kilowatt hours
Producing Department 2-Capacity used = 165,000 kilowatt hour

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

fixed costs = sales +loss - variable cost

= 270,000*$1+20,000*$1-250,000*1=$40,000(Department 1)

= 165,000+15000-150000=30000(Department 2)

variable costs = (Total units produced*cost per unit)-Total fixed costs

= 270,000*1-250,000=20,000(Department 1)

= 165,000*1-150,000=15,000(Department 2)

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