Haverhill Electronics $($HE$)$ has offered to supply the county government with one model of its security screening device at $$cost plus $25$ percent.$$ HE operates a manufacturing plant that can produce $22,000$ devices per year, but it normally produces $20,000.$ The costs to produce $20,000$ devices follow.

Total Cost Cost per Device

Production costs:

Materials $ $2,200,000\mathrm{.}00$ $ $110\mathrm{.}00$

Labor $3,200,000\mathrm{.}00160\mathrm{.}00$

Supplies and other costs that will vary with production $960,000\mathrm{.}0048\mathrm{.}00$

Indirect cost that will not vary with production $960,000\mathrm{.}0048\mathrm{.}00$

Variable marketing costs $520,000\mathrm{.}0026\mathrm{.}00$

Administrative costs $($will not vary with production$)6,560,000\mathrm{.}00328\mathrm{.}00$

Totals $ $14,400,000\mathrm{.}00$ $ $720\mathrm{.}00$

Based on these data, company management expects to receive $$900\mathrm{.}00(=$ $$720\mathrm{.}00\backslash$times $125$ percent$)$ per device for those sold on this contract. After completing $200$ devices, the company sent a bill $($invoice$)$ to the government for $$14,400,000(=200$ devices $\backslash$times $$900\mathrm{.}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.

Materials $ $110\mathrm{.}00$

Labor $160\mathrm{.}00$

Supplies and other costs that will vary with production $48\mathrm{.}00$

$ $318\mathrm{.}00$

Therefore, the price per device should be $$397\mathrm{.}50(=$ $$318\mathrm{.}00\backslash$times $125$ percent$).$ The county government ignored marketing costs because the contract bypassed the usual selling channels.

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.