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. In the following month, the power generation department costs amounted to $4.3 million for 51 million kwh. Kong Dept.'s usage was the same, but the Kang Dept. increased output to 4.1 million kangs, each using the standard power allowance. If KKC employs an insulating cost allocation mechanism, and fixed costs are shared equally, which is true?

A) Kang will be charged $1.93 million
B) Kong will be charged $1.79 million
C) Kong will be charged $2.07 million
D) Kang will be charged $2.29 million
E) None of the above