(Appendix 11B) Mannerman Products, Inc., operates an electric power plant which provides all electrical power for the company's Machining and Fabrication departments. Information on kilowatt-hours (kwh) of power usage in these departments for May follow:
The costs of the electric power plant are all fixed. Budgeted fixed costs for May totaled $60,000 and are determined by peak-period requirements. Actual fixed costs for the month totaled $65,000. The Machining Department requires 60% of the peak-period capacity and the Fabrication Department requires 40%.
-How much (if any)of the electric power plant's actual fixed costs of $65,000 should not be charged to the other departments?
A) $0
B) $10,000
C) $5,000
D) $15,000

Question

(Appendix 11B) Mannerman Products, Inc., operates an electric power plant which provides all electrical power for the company's Machining and Fabrication departments. Information on kilowatt-hours (kwh) of power usage in these departments for May follow:
  The costs of the electric power plant are all fixed. Budgeted fixed costs for May totaled $60,000 and are determined by peak-period requirements. Actual fixed costs for the month totaled $65,000. The Machining Department requires 60% of the peak-period capacity and the Fabrication Department requires 40%.
-How much (if any)of the electric power plant's actual fixed costs of $65,000 should not be charged to the other departments?
A) $0 
B) $10,000 
C) $5,000 
D) $15,000

Quizplus · Accepted Answer

Spending variance = Actual cost incurred - Charges to the operating departments
= $65,000 - $60,000 = $5,000