(Appendix 11B) Mannerman Products, Inc

question 15

Multiple Choice

(Appendix 11B) Mannerman Products, Inc., operates an electric power plant which provides all electrical power for the company's Machining and Fabrication departments. Information on kilowatt-hours (kwh) of power usage in these departments for May follow:
The costs of the electric power plant are all fixed. Budgeted fixed costs for May totaled $60,000 and are determined by peak-period requirements. Actual fixed costs for the month totaled $65,000. The Machining Department requires 60% of the peak-period capacity and the Fabrication Department requires 40%.
-How much (if any) of the electric power plant's actual fixed costs of $65,000 should not be charged to the other departments?

• A) $0
• B) $10,000
• C) $5,000
• D) $15,000

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Definitions:

Price Controls

Restrictions on pricing for goods and services in a market, enforced by the government.

Equilibrium Quantity

The quantity of goods or services that is supplied and demanded at the equilibrium price, where the market clears.

Tax Per Unit

A fixed amount of tax applied to a product or service, based on the quantity sold, rather than the value.

Tax Incidence

The study of who ultimately pays for and bears the cost of taxation, whether it be consumers, producers, or others.