Fact Pattern:

A company has two support departments, Power and Maintenance, and two production departments, Machining and Assembly. All costs are regarded as strictly variable. For September, the following information is available:

Support Departments

Production Departments

Power

Maintenance

Machining

Assembly

Direct costs

$62,500

$40,000

$25,000

$15,000

Actual activity:

Kilowatt hrs.

50,000

150,000

50,000

Maintenance hours

250

1,125

1,125

Question

Assume the company uses the sequential or step method for allocating support department costs to production departments. The company begins with the support department that receives the least support from other support departments. What dollar amount of Power Department costs will be allocated to the Maintenance Department for September?

A.

$12,500

B.

$0

C.

$8,000

D.

$6,250