Steamco is reviewing its operations to see what additional energy-saving projects it might adopt. The company's...

  

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Steamco is reviewing its operations to see what additional energy-saving projects it might adopt. The company's manufacturing plant generates its own electricity using a process capturing steam from its production processes. A summary of the use of service departments by other service departments as well as by the two producing departments at the plant follows: Services Used by Variable Equipment Costs Maintenance Alpha Beta 0.40 Fixed Service Department Steam Generation Steam Generation Costs 0.10 0.50 Electric Generating Fixed costs Variable costs Equipment Maintenance 0.10 0.10 0.10 0.05 0.30 0.50 0.55 0.30 0.20 0.10 0.05 0.50 0.15 Direct costs (in thousands) in the various departments follow: Department Steam Generation (S1) Electric Generating: Fixed costs (S2) Variable costs (S3) Equipment Maintenance (S4) Direct Cost $ 200.00 82.50 240.00 132.00 Production Alpha (P1) Beta (P2) 1,600.00 1,200.00 Steamco currently allocates costs of service departments to production departments using the step method. The local power company indicates that it would charge $480,000 per year for the electricity that Steamco now generates internally. Management rejected switching to the power company on the grounds that its rates would cost more than the $322,500 ($82,500 + $240,000) cost of the present, company-owned, system. Required: a. What costs of electric service did management use to prepare the basis for its decision to continue generating power internally? * Direct cost O Indirect cost O Both b-1. Prepare for management an analysis of the costs of the company's own electric generating operations. (Use the step method.) The rank order of allocation is (1) S1, (2) S4, (3) S2, and (4) S3. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Enter your answers in thousands of dollars rounded to 2 decimal places.) b-1. Prepare for management an analysis of the costs of the company's own electric generating operations. (Use the step method.) The rank order of allocation is (1) S1, (2) S4, (3) S2, and (4) S3. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Enter your answers in thousands of dollars rounded to 2 decimal places.) To Amount to be allocated From S4 S2 S3 P1 P2 Direct department costs $132.00 $ 82.50 $240.00 1,600.00 1,200.00 Steam generation (S1) $ 200.00 Equipment maintenance (S4) Electric generating - fixed (S2) Electric generating - variable (S3) 80.00 20.00 100.00 132.00 16.50 8.25 82.50 24.75 99.00 37.15 61.38 328.25 212.40 115.85 Total cost of company owned system b-2. Should management continue to generate power internally? O Yes No c-1. Assume the company could realize $195,000 per year from the sale of the steam now used for electric generating after selling costs. Compute the total relevant internal costs for the company. (Enter your answer in thousands of dollars. Round your answer to 2 decimal places.) Total relevant internal costs Steamco is reviewing its operations to see what additional energy-saving projects it might adopt. The company's manufacturing plant generates its own electricity using a process capturing steam from its production processes. A summary of the use of service departments by other service departments as well as by the two producing departments at the plant follows: Services Used by Variable Equipment Costs Maintenance Alpha Beta 0.40 Fixed Service Department Steam Generation Steam Generation Costs 0.10 0.50 Electric Generating Fixed costs Variable costs Equipment Maintenance 0.10 0.10 0.10 0.05 0.30 0.50 0.55 0.30 0.20 0.10 0.05 0.50 0.15 Direct costs (in thousands) in the various departments follow: Department Steam Generation (S1) Electric Generating: Fixed costs (S2) Variable costs (S3) Equipment Maintenance (S4) Direct Cost $ 200.00 82.50 240.00 132.00 Production Alpha (P1) Beta (P2) 1,600.00 1,200.00 Steamco currently allocates costs of service departments to production departments using the step method. The local power company indicates that it would charge $480,000 per year for the electricity that Steamco now generates internally. Management rejected switching to the power company on the grounds that its rates would cost more than the $322,500 ($82,500 + $240,000) cost of the present, company-owned, system. Required: a. What costs of electric service did management use to prepare the basis for its decision to continue generating power internally? * Direct cost O Indirect cost O Both b-1. Prepare for management an analysis of the costs of the company's own electric generating operations. (Use the step method.) The rank order of allocation is (1) S1, (2) S4, (3) S2, and (4) S3. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Enter your answers in thousands of dollars rounded to 2 decimal places.) b-1. Prepare for management an analysis of the costs of the company's own electric generating operations. (Use the step method.) The rank order of allocation is (1) S1, (2) S4, (3) S2, and (4) S3. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Enter your answers in thousands of dollars rounded to 2 decimal places.) To Amount to be allocated From S4 S2 S3 P1 P2 Direct department costs $132.00 $ 82.50 $240.00 1,600.00 1,200.00 Steam generation (S1) $ 200.00 Equipment maintenance (S4) Electric generating - fixed (S2) Electric generating - variable (S3) 80.00 20.00 100.00 132.00 16.50 8.25 82.50 24.75 99.00 37.15 61.38 328.25 212.40 115.85 Total cost of company owned system b-2. Should management continue to generate power internally? O Yes No c-1. Assume the company could realize $195,000 per year from the sale of the steam now used for electric generating after selling costs. Compute the total relevant internal costs for the company. (Enter your answer in thousands of dollars. Round your answer to 2 decimal places.) Total relevant internal costs

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Part a Direct Cost Part b1 S1 Steam generation S2 Electric generatingfixed S3 Electric generatingvar... View the full answer