1.Alameda Instruments (AI) has offered to supply the Air Force with computer monitors at "cost plus 20 percent." AI operates a manufacturing plant that can produce 22,000 monitors per year, but it normally produces 20,000. The costs to produce 20,000 monitors follow:

	Total Cost			Cost per Monitor
Production costs:
Materials	$	1,340,000		$	67
Labor		1,600,000			80
Supplies and other costs that will vary with production		880,000			44
Indirect cost that will not vary with production		680,000			34
Variable marketing costs		1,600,000			80
Administrative costs (all fixed)		1,180,000			59
Totals	$	7,280,000		$	364

Based on these data, company management expects to receive $436.8 (= $364 120 percent) per monitor for those sold on this contract. After completing 2,000 monitors, the company sent a bill (invoice) to the government for $873,600 (= 2,000 monitors $436.8 per monitor).

The president of the company received a call from an Air Force auditor, who stated that the per monitor cost should be

Materials	$	67
Labor		80
Supplies and other costs that will vary with production		44
	$	191

Therefore, the price per monitor should be $229.2 (= $191 120 percent). The Air Force ignored marketing costs because the contract bypassed the usual selling channels.

Required:

What is the price per computer monitor that should be charged by Alameda Instruments under the following options for considering the cost basis of the monitors? (Round your intermediate calculations to 2 decimal places and your final answers to 2 decimal places.)

Options:

A.

Only the differential production costs are used as the cost basis.

B.

The total cost per monitor for normal production of 20,000 monitors are used as the cost basis.

C.

The total cost per monitor for production of 22,000 monitors, excluding marketing costs, are used as the cost basis.

D.

The total cost per monitor for production of 22,000 monitors, including marketing costs, are used as the cost basis.

2.

T-Comm makes a variety of products. It is organized in two divisions, North and South. South Division normally sells to outside customers but, on occasion, also sells to the North Division. When it does, corporate policy states that the price must be cost plus 20 percent to ensure a fair return to the selling division. South received an order from North Division for 300 units. Souths planned output for the year had been 1,200 units before Norths order. Souths capacity is 1,500 units per year. The costs for producing those 1,200 units follow:

	Total			Per Unit
Materials	$	116,400		$	97
Direct labor		56,400			47
Other costs varying with output		33,600			28
Fixed costs		540,000			450
Total costs	$	746,400		$	622

Based on these data, South's controller calculated that the unit price for North's order should be $746.4 (= $622 120 percent). After producing and shipping the 300 units, South's sent an invoice for $223,920. Shortly thereafter, West received a note from the buyer at North's stating that this invoice was not in accordance with company policy. The unit cost should have been

Materials	$	97
Direct labor		47
Other costs varying with output		28
Total	$	172

The price per unit would be $206.4 (= $172 120 percent).

Required:

What is the total price for 300 units of products that should be charged by South Division under the following options for considering the cost basis of units? (Do not round intermediate calculations.)

Options:

A.	Use the full per unit cost for normal production of 1,200 units
B.	Use only differential costs as the cost basis.
C.	Use differential costs plus a share of fixed costs, based on actual production volume (with North's order) of 1,500 units.