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