15-16 Single-rate versus dual-rate methods, support department. The Detroit power plant that services all manufacturing departments of MidWest Engineering has a budget for the coming year. This budget has been expressed in the following monthly terms:

Manufacturing Department Needed at Practical CapacityProduction Level (Kilowatt-Hours) Average Expected MonthlyUsage (Kilowatt-Hours)

Livonia 16,000 12,000 Warren 22,000 10,000 Dearborn 23,000 8,000 Westland 19,000 10,000 Total 80,000 40,000

The expected monthly costs for operating the power plant during the budget year are $21,600: $4,000 variable and $17,600 fixed.

2. Assume the dual-rate method is used with separate cost pools for the variable and fixed costs. Variable costs are allocated on the basis of expected monthly usage. Fixed costs are allocated on the basis of practical capacity. What budgeted amounts will be allocated to each manufacturing department? Why might you prefer the dual-rate method?