Cost Allocation and Performance Evaluation at McLaren Automotive

Requirements:

Develop a cost allocation method for McLaren Automotive's production facilities to allocate overhead costs to different vehicle models.

Vehicle Model	Direct Costs per Unit ($)	Overhead Costs ($)
720S	300,000	20,000,000
GT	250,000	18,000,000

• Implement an activity-based costing (ABC) system to allocate manufacturing overhead costs to McLaren Automotive's 720S and GT models.
• Evaluate the accuracy of cost allocation methods in measuring the profitability of each vehicle model at McLaren Automotive.
• Recommend cost allocation improvements to enhance decision-making and performance evaluation at McLaren Automotive.