Production A Costs are as follows: $4.5 million per year in rent for factory and
ID: 2789839 • Letter: P
Question
Production A
Costs are as follows:
$4.5 million per year in rent for factory and machinery
components and labor in the amount of $12 million will produce 300 units per year
Production B
In an alternative production method, the production of Android01 will share some production facilities and service divisions with Processor01. Fixed costs are $5 million per year, and are to be assigned at the rate of 30 percent to Android01 and 70 percent to Processor01.
The variable cost of the production facilities and service divisions is $20 million per year. The square footage of factory space and labor needed for the production of 500 units of Processor01 and 300 units of Android01 are listed below.
The remaining cost for the production of Android01 is for components, at $25,000 per unit.
Question 1: In Method B, what would be the cost per unit of producing Android01 using factory space as the allocation basis? What would be the cost per unit using labor as the allocation basis?
Before starting on your calculations, review materials on production cost allocation.
Submit your Allocation of Costs Report and Calculations to the dropbox below. Submit a spreadsheet showing your calculations in Excel and provide a narrative analysis in Word.
Square Feet Labor Processor01 (500 units) 70,000 120 Android01 (300 units) 30,000 80Explanation / Answer
Total Cost for Allocation Variable Cost 2,00,00,000 Fixed Cost 50,00,000 2,50,00,000 Cost allocated on the basis of the utilisation of the land Processor 01 Android 01 Total Land Use 70,000 30,000 1,00,000 Ratio of expense 70% 30% Allocation 1,75,00,000 75,00,000 2,50,00,000 No of units 500 300 Allocated Cost per unit 35,000 25,000 Component Cost 25,000 Total Cost 50,000 Cost allocated on the basis of the Labor Processor 01 Android 01 Total Land Use 120 80 200 Ratio of expense 60% 40% Allocation 1,50,00,000 1,00,00,000 2,50,00,000 No of units 500 300 Allocated Cost per unit 30,000 33,333 Component Cost 25,000 Total Cost 58,333
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