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 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