Haverhill Electronics (HE) has offered to supply the county government with one model of its security screening device at "cost plus 25percent." HE operates a manufacturing plant that can produce 22.000 devices per year, but it normally produces 20,000. The costs toproduce 20.000 devices follow.Production costs:MaterialsLaborSupplies and other costs that will vary with productionIndirect cost that will not vary with productionVariable marketing costsAdministrative costs (will not vary with production)TotalsMaterialsLaborSupplies and other costs that will vary with productionCost perDeviceTotal Cost$ 3,800,000.004,800,000.001,440,000.001,440,000.00680,000.0015,040,000.0027,200,000.00 $ 1,360.00Based on these data, company management expects to receive $1,700.00 (= $1,360.00x 125 percent) per device for those sold on thiscontract. After completing 200 devices, the company sent a bill (invoice) to the government for $27,200,000 (= 200 devices x$1,700.00 per device).The president of the company received a call from a county auditor, who stated that the per device cost should be as follows.$190.00240.0072.00$ 502.00Option AOption BOption COption D$ 190.00240.00Per DeviceCost Basis72.0072.00Therefore, the price per device should be $627.50 (= $502.00 x 125 percent). The county government ignored marketing costsbecause the contract bypassed the usual selling channels.RecommendedPrice per Device34.00752.00Required:For each of the four situations, calculate the cost basis per device based on the information shown above.Note: 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.

There are methods of the selection of the price (selling price) and usually it is logically based…

Required: For each of the four situations, calculate the cost basis per device based on the information shown above. Note: 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. Option A Option B Option C Option D Per Device Cost Basis Recommended Price per Device

Required: For each of the four situations, calculate the cost basis per device based on the information shown above. Note: 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. Option A Option B Option C Option D Per Device Cost Basis Recommended Price per Device

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter13: The Balanced Scorecard: Strategic-based Control

Section: Chapter Questions

Problem 8E: Hatch Manufacturing produces multiple machine parts. The theoretical cycle time for one of its...

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