Process Costing for a Service Company Madison Electric Company uses a fossil fuel (coal) plant for generating electricity. The facility can generate 900 megawatts (million watts) per hour. The plant operates 600 hours during March. Electricity is used as it is generated; thus, there are no inventories at the beginning or end of the period. The March conversion and fuel costs are as follows: Conversion costs Fuel Total $40,500,000 10,800,000 $51,300,000 Madison also has a wind farm that can generate 100 megawatts per hour. The wind farm receives sufficient wind to run 300 hours for March. The March conversion costs for the wind farm (mostly depreciation) are as follows: Conversion costs a. Determine the cost per megawatt hour (MWh) for the fossil fuel plant and the wind farm to identify the lowest cost facility in March. $2,700,000
Process Costing for a Service Company Madison Electric Company uses a fossil fuel (coal) plant for generating electricity. The facility can generate 900 megawatts (million watts) per hour. The plant operates 600 hours during March. Electricity is used as it is generated; thus, there are no inventories at the beginning or end of the period. The March conversion and fuel costs are as follows: Conversion costs Fuel Total $40,500,000 10,800,000 $51,300,000 Madison also has a wind farm that can generate 100 megawatts per hour. The wind farm receives sufficient wind to run 300 hours for March. The March conversion costs for the wind farm (mostly depreciation) are as follows: Conversion costs a. Determine the cost per megawatt hour (MWh) for the fossil fuel plant and the wind farm to identify the lowest cost facility in March. $2,700,000
Chapter1: Financial Statements And Business Decisions
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![Process Costing for a Service Company
Madison Electric Company uses a fossil fuel (coal) plant
for generating electricity. The facility can generate 900
megawatts (million watts) per hour. The plant operates
600 hours during March. Electricity is used as it is
generated; thus, there are no inventories at the
beginning or end of the period. The March conversion
and fuel costs are as follows:
Conversion costs
Fuel
Total
Madison also has a wind farm that can generate 100
megawatts per hour. The wind farm receives sufficient
wind to run 300 hours for March. The March conversion
costs for the wind farm (mostly depreciation) are as
follows:
Conversion costs
$40,500,000
10,800,000
$51,300,000
Fossil plant
Wind farm
$2,700,000
a. Determine the cost per megawatt hour (MWh) for the
fossil fuel plant and the wind farm to identify the lowest
cost facility in March.
Cost Per Mega-watt Hour
per MWh
per MWh
b. Are the equivalent units of production needed in
determining the cost per megawatt hour (MWh) for
generating electricity?
c. Is the wind farm reliable for generating electricity?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F95236ad7-6132-43b7-89f4-4633119c5e63%2F0d92da28-16f5-425f-8d2f-0e04a0143645%2Fq85h975_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Process Costing for a Service Company
Madison Electric Company uses a fossil fuel (coal) plant
for generating electricity. The facility can generate 900
megawatts (million watts) per hour. The plant operates
600 hours during March. Electricity is used as it is
generated; thus, there are no inventories at the
beginning or end of the period. The March conversion
and fuel costs are as follows:
Conversion costs
Fuel
Total
Madison also has a wind farm that can generate 100
megawatts per hour. The wind farm receives sufficient
wind to run 300 hours for March. The March conversion
costs for the wind farm (mostly depreciation) are as
follows:
Conversion costs
$40,500,000
10,800,000
$51,300,000
Fossil plant
Wind farm
$2,700,000
a. Determine the cost per megawatt hour (MWh) for the
fossil fuel plant and the wind farm to identify the lowest
cost facility in March.
Cost Per Mega-watt Hour
per MWh
per MWh
b. Are the equivalent units of production needed in
determining the cost per megawatt hour (MWh) for
generating electricity?
c. Is the wind farm reliable for generating electricity?
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