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The Company has two products. Product 1 is manufactured entirely in department X. Product 2 is manufactured entirely in department Y. To produce these two
The Company has two products. Product 1 is manufactured entirely in department X. Product 2 is manufactured entirely in department Y. To produce these two products, the Company has two support departments: A (a materials-handling department) and B (a power-generating department). An analysis of the work done by departments A and B in a typical period follows. The budgeted costs of the support departments for the coming year are as follows. Used by Supplied by A B X Y A 420 1,050 630 B 3,000 500 1,500 The work done in department A is measured by the direct labour-hours of materials-handling time. The work done in department B is measured by the kilowatt-hours of power. Department A Department B (Materials Handling) (Power Generation) Variable indirect labour and indirect material costs $312,000 $60,000 Supervision 93,600 100,000 Depreciation 31,200 100,000 $436,800 $260,000 + Power costs + Materials-handling costs The budgeted costs of the operating departments for the coming year are for department X and for department Y. Supervision costs are salary costs. Depreciation in department B is the straight-line depreciation of power-generation equipment in its 19th year of an estimated 25-year useful life; it is old, but well maintained, equipment
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