Question-6 PQR Ltd has its own power plant, which has two users, Cutting Department and Welding Department. When the plans were prepared for the power plant. top management decided that its practical capacity should be 1,50,000 machine hours. Annual budgeted practical capacity fixed costs are 9,00,000 and budgeted variable costs are 4 per machine-hour. The following data are available: Cutting Welding Total Departme Departme nt nt 60,000 40,000 1,00,000 Actual Usage in 2012-13 (Machine hours) Practical capacity for each department (Machine hours) 90,000 60,000 1,50,000 Required (i) Allocate the power plant's cost to the cutting and the welding department using a single rate method in which the budgeted rate is calculated using practical capacity and costs are allocated based on actual usage. (ii) Allocate the power plant's cost to the cutting and welding departments, using the dual-rate method in which fixed costs are allocated based on practical capacity and variable costs are allocated based on actual usage. (iii) Allocate the power plant's cost to the cutting and welding departments using the dual-rate method in which the fixed-cost rate is calculated using practical capacity, but fixed costs are allocated to the cutting and welding department based on actual usage. Variable costs are allocated based on actual usage