Assume that the direct cost per phone is:

Direct material: $40 Direct labour: $25

Assume that the factory where the phones are made is also used to make tablets (e.g. i pads). The annual costs of the factory (rent, insurance, maintenance etc) are $10,000,000.

How much of this $10 million cost should be allocated to each phone made?

The factory is expected to make 219,500 phones and 94,861 tablets in the year. It takes 1.5 labour hours to make a phone and 1.8 labour hours to make a tablet.