P & M Corporation Manufactures Products Exclusively for Military Clients

Multiple Choice

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 Corporation elects to use the step-down method and begins the allocation with the $80,000 of maintenance cost, what amount of the $80,000 of maintenance cost should be assigned to the power department in the first step?

A) $13,333.33
B) $16,000.00
C) $0.00
D) $40,000.00