King Khan Corporation (KKC) Manufactures Kongs and Kangs, the Production

Multiple Choice

King Khan Corporation (KKC) manufactures kongs and kangs, the production of which requires considerable energy. Power generation department costs amounted to $4 million this month, for a total of 50 million kilowatt hours (kwh) supplied to the plant. Analysis shows that 40% of power generation costs are fixed. This month the Kang Dept. made 5 million kangs, each using 4 kwh, and the Kang Dept. made 4 million kangs, each using 6 kwh. If KKC uses the simplest algorithm to allocate power costs, which is not true?

A) Kong will be charged $1.6 million
B) Kang will be charged $2.18 million
C) Kang's charge will depend on Kong's usage
D) Since the production departments consume the vast majority of the plant's power costs, it is not cost-efficient to allocate power costs to the service departments
E) All are true