P & M Corporation manufactures products exclusively for military clients. Due to security concerns, each product is manufactured entirely within its own department. Department X specializes in communications equipment and Department Y in armor plating. Both production departments are supported by the corporation's power-generating department (Department A) and its equipment maintenance department (Department B). The work supplied by support Department A is measured in kilowatt-hours of electricity, and that in Department B is measured in labor hours. Departments A and B also consume service from one another. The work done by Departments A and B is summarized in the table below.

-The costs of power and maintenance for the coming year are budgeted to be $200,000 and $80,000, respectively. If P & M chooses to use the reciprocal method, which of the following equations would be used to model the power department's total cost?
A) Power Department Costs = $200,000
B) Power Department Costs = $200,000 + 0.5 x Maintenance Costs + 0)5 x Department X Costs + 0.3 x Department Y Costs
C) Power Department Costs = $200,000 + 0.5 x Maintenance Costs
D) Power Department Costs = $200,000 + 0.2 x Maintenance Costs

Question

P & M Corporation manufactures products exclusively for military clients. Due to security concerns, each product is manufactured entirely within its own department. Department X specializes in communications equipment and Department Y in armor plating. Both production departments are supported by the corporation's power-generating department (Department A) and its equipment maintenance department (Department B). The work supplied by support Department A is measured in kilowatt-hours of electricity, and that in Department B is measured in labor hours. Departments A and B also consume service from one another. The work done by Departments A and B is summarized in the table below.
 
-The costs of power and maintenance for the coming year are budgeted to be $200,000 and $80,000, respectively. If P & M chooses to use the reciprocal method, which of the following equations would be used to model the power department's total cost?
A) Power Department Costs = $200,000 
B) Power Department Costs = $200,000 + 0.5 x Maintenance Costs + 0)5 x Department X Costs + 0.3 x Department Y Costs 
C) Power Department Costs = $200,000 + 0.5 x Maintenance Costs 
D) Power Department Costs = $200,000 + 0.2 x Maintenance Costs

Quizplus · Accepted Answer

The reciprocal method accounts for the interdepartmental services between service departments. Here, the Power Department's costs include its own costs plus a portion of the Maintenance Department's costs.

P & M Corporation Manufactures Products Exclusively for Military Clients