Problem $1-41($Algo$)$ Cost Data for Managerial Purposes $($LO $1-3)$

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.

Based on these data, company management expects to receive $$1,000\mathrm{.}00(=$$$800\mathrm{.}00125$ percent$)$ per device for those sold on this

contract. After completing $200$ devices, the company sent a bill $($invoice$)$ to the government for $$16,000,000(=200$ devices $$

$$1,000\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.

Therefore, the price per device should be $$426\mathrm{.}25(=$$$341\mathrm{.}00125$ 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.