27th Edition

ISBN: 9781337272094

Author: WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher: Cengage Learning,

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Textbook Question

Chapter 20, Problem 20.20EX

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	$40,500,000
Fuel	10,800,000
Total	$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

$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,

b. Why are equivalent units of production not needed in determining the cost per megawatt hour (MWh) for generating electricity?

c. What advantage does the fossil fuel plant have over the wind farm?

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Chapter 20, Problem 20.19EX

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Chapter 20 Solutions

Accounting

Ch. 20 - Which type of cost system, process or job order,...Ch. 20 - In job order cost accounting, the three elements...Ch. 20 - Prob. 3DQ Ch. 20 - Why is the cost per equivalent unit often...Ch. 20 - What is the purpose for determining the cost per...Ch. 20 - Rameriz Company is a process manufacturer with two...Ch. 20 - What is the most important purpose of the cost of...Ch. 20 - Prob. 8DQ Ch. 20 - Prob. 9DQ Ch. 20 - Prob. 10DQ

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Solution Summary: The author calculates the cost per megawatt hour for the fossil fuel plant and wind farm of the Company ME.

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