Imperial Devices (ID) has offered to supply the state government with one model of its security screening device at "cost plus 20 percent." ID operates a manufacturing plant that can produce 22,000 devices per year, but it normally produces 20,000. The costs to produce 20,000 devices follow:
Total Cost | Cost per Device |
||||||
Production costs: | |||||||
Materials | $ | 1,140,000 | $ | 57.00 | |||
Labor | 1,780,000 | 89.00 | |||||
Supplies and other costs that will vary with production | 840,000 | 42.00 | |||||
Indirect cost that will not vary with production | 520,000 | 26.00 | |||||
Variable marketing costs | 1,600,000 | 80.00 | |||||
Administrative costs (will not vary with production) | 1,200,000 | 60.00 | |||||
Totals | $ | 7,080,000 | $ | 354.00 | |||
Based on these data, company management expects to receive $424.80 (= $354.00 × 120 percent) per monitor for those sold on this contract. After completing 2,000 monitors, the company sent a bill (invoice) to the government for $849,600 (= 2,000 monitors × $424.80 per monitor).
The president of the company received a call from a state auditor, who stated that the per monitor cost should be:
Materials | $ | 57.00 |
Labor | 89.00 | |
Supplies and other costs that will vary with production | 42.00 | |
$ | 188.00 | |
Therefore, the price per monitor should be $225.60 (= $188.00 × 120 percent). The state government ignored marketing costs because the contract bypassed the usual selling channels.
Required:
For each of the four situations, calculate the cost basis per device based on the information shown above. (Round intermediate calculations and final answers to 2 decimal places.)
Options:
A. Only the differential production costs could be considered as the cost basis.
B. The total cost per device for normal production of 20,000 devices could be used as the cost basis.
C. The total cost per device for production of 22,000 devices, excluding marketing costs, could be used as the cost basis.
D. The total cost per device for production of 22,000 devices, including marketing costs, could be used as the cost basis.
Imperial Devices (ID) has offered to supply the state government with one model of its security screening device at "cost plus 20 percent." ID operates a manufacturing plant that can produce 22,000 devices per year, but it normally produces 20,000. The costs to produce 20,000 devices follow:
Total Cost | Cost per Device |
||||||
Production costs: | |||||||
Materials | $ | 1,140,000 | $ | 57.00 | |||
Labor | 1,780,000 | 89.00 | |||||
Supplies and other costs that will vary with production | 840,000 | 42.00 | |||||
Indirect cost that will not vary with production | 520,000 | 26.00 | |||||
Variable marketing costs | 1,600,000 | 80.00 | |||||
Administrative costs (will not vary with production) | 1,200,000 | 60.00 | |||||
Totals | $ | 7,080,000 | $ | 354.00 | |||
Based on these data, company management expects to receive $424.80 (= $354.00 × 120 percent) per monitor for those sold on this contract. After completing 2,000 monitors, the company sent a bill (invoice) to the government for $849,600 (= 2,000 monitors × $424.80 per monitor).
The president of the company received a call from a state auditor, who stated that the per monitor cost should be:
Materials | $ | 57.00 |
Labor | 89.00 | |
Supplies and other costs that will vary with production | 42.00 | |
$ | 188.00 | |
Therefore, the price per monitor should be $225.60 (= $188.00 × 120 percent). The state government ignored marketing costs because the contract bypassed the usual selling channels.
Required:
For each of the four situations, calculate the cost basis per device based on the information shown above. (Round intermediate calculations and final answers to 2 decimal places.)
Options:
A. Only the differential production costs could be considered as the cost basis.
B. The total cost per device for normal production of 20,000 devices could be used as the cost basis.
C. The total cost per device for production of 22,000 devices, excluding marketing costs, could be used as the cost basis.
D. The total cost per device for production of 22,000 devices, including marketing costs, could be used as the cost basis.
Need help with calculating Per Device Cost and Recommended Price per Device for options C and D
Costs | A | B | C | D | ||||
Materials (variable) | $ 57 | $ 57.00 | $ 57.00 | $ 57.00 | $ 57.00 | |||
Labor (variable) | $ 89 | $ 89.00 | $ 89.00 | $ 89.00 | $ 89.00 | |||
Supplies (variable) | $ 42 | $ 42.00 | $ 42.00 | $ 42.00 | $ 42.00 | |||
Indirect costs (fixed) | $ 520,000 | N/A | a | $ 26.00 | b | $ 23.64 | $ 23.64 | |
Marketing (variable) | $ 80 | N/A | $ 80.00 | N/A | $ 80.00 | |||
Administrative (fixed) | $ 1,200,000 | N/A | c | $ 60.00 | d | $ 54.55 | $ 54.55 | |
Per monitor cost basis | $ 188.00 | $ 354.00 | $ 266.18 | $ 346.18 | ||||
Per monitor price (Cost + 20%) | $ 225.60 | $ 424.80 | $ 319.42 | $ 415.42 | ||||
a | 520000/20000 | $ 26.00 | ||||||
b | 520000/22000 | $ 23.64 | ||||||
c | 1200000/20000 | $ 60.00 | ||||||
d | 1200000/22000 | $ 54.55 |
Imperial Devices (ID) has offered to supply the state government with one model of its security...
Imperial Devices (ID) has offered to supply the state government with one model of its security screening device at "cost plus 20 percent." ID operates a manufacturing plant that can produce 22,000 devices per year, but it normally produces 20,000. The costs to produce 20,000 devices follow: Total Cost Cost per Device Production costs: Materials $ 1,140,000 $ 57.00 Labor 1,760,000 88.00 Supplies and other costs that will vary with production 820,000 41.00 Indirect cost that will not vary with...
Imperial Devices (ID) has offered to supply the state government with one model of its security screening device at "cost plus 20 percent." ID operates a manufacturing plant that can produce 22,000 devices per year, but it normally produces 20,000. The costs to produce 20,000 devices follow: Total Cost Cost per Device $ Production costs: Materials Labor Supplies and other costs that will vary with production Indirect cost that will not vary with production Variable marketing costs Administrative costs (will...
Imperial Devices (ID) has offered to supply the state government with one model of its security screening device at "cost plus 20 percent." ID operates a manufacturing plant that can produce 22,000 devices per year, but it normally produces 20,000. The costs to produce 20,000 devices follow: Total Cost Cost per Device Production costs: Materials Labor Supplies and other costs that will vary with production Indirect cost that will not vary with production Variable marketing costs Administrative costs (will not...
Imperial Devices (ID) has offered to supply the state government with one model of its security screening device at "cost plus 20 percent." ID operates a manufacturing plant that can produce 22,000 devices per year, but it normally produces 20,000. The costs to produce 20,000 devices follow: Total Cost Cost per Device Production costs: Materials $ 1,180,000 $ 59.00 Labor 1,740,000 87.00 Supplies and other costs that will vary with production 700,000 35.00 Indirect cost that will not vary with...
Imperial Devices (ID) has offered to supply the state government with one model of its security screening device at "cost plus 20 percent." ID operates a manufacturing plant that can produce 22,000 devices per year, but it normally produces 20,000. The costs to produce 20,000 devices follow: Total Cost Cost per Device Production costs: Materials $ 1,280,000 $ 64.00 Labor 1,740,000 87.00 Supplies and other costs that will vary with production 780,000 39.00 Indirect cost that will not vary with...
Saved -3 Imperial Devices (ID) has offered to supply the state government with one model of its security screening device at cost plus 20 percent." ID operates a manufacturing plant that can produce 22,000 devices per year, but it normally produces 20,000. The costs to produce 20.000 devices follow: Cost per Device Total Cost Production costs: Materials Labor Supplies and other costs that will vary with production Indirect cost that will not vary with production Variable marketing costs Administrative costs...
Imperial Devices (D) has offered to supply the state government with one model of its security screening device at "cost plus 20 percent." ID operates a manufacturing plant that can produce 22,000 devices per year, but it normally produces 20,000. The costs to produce 20,000 devices follow: Cost per Device Total Cost Production costs: Materials Labor Supplies and other costs that will vary with production Indirect cost that will not vary with production Variable marketing costs Administrative conto (will not...
instructions | help Imperial Devices (ID) has offered to supply the state government with one model of its security screening device at "cost plus 20 percent." ID operates a manufacturing plant that can produce 22,000 devices per year, but it normally produces 20,000. The costs to produce 20,000 devices follow: Total Cost Cost per Device Production costs: Materials $ 1,400,000 $ 70.00 Labor 1,760,000 88.00 Supplies and other costs that will vary with production 760,000 38.00 Indirect cost that will...
Imperial Devices (ID) has offered to supply the state government with one model of its security screening device at “cost plus 20 percent.” ID operates a manufacturing plant that can produce 66,000 devices per year, but it normally produces 60,000. The costs to produce 60,000 devices follow: Total Cost Cost per Device Production costs: Materials $ 4,500,000 $ 75 Labor 9,000,000 150 Supplies and other costs that will vary with production 2,700,000 45 Indirect cost that will not vary with...
Imperial Devices (ID) has offered to supply the state government with one model of its security screening device at “cost plus 20 percent.” ID operates a manufacturing plant that can produce 66,000 devices per year, but it normally produces 60,000. The costs to produce 60,000 devices follow: Total Cost Cost per Device Production costs: Materials $ 4,500,000 $ 75 Labor 9,000,000 150 Supplies and other costs that will vary with production 2,700,000 45 Indirect cost that will not vary with...