You have been asked to look at production options for the Android01, since production methods and allocation of costs have implications for cost per unit. Two alternative methods of production are being considered. Begin by gathering data (using financial information in decision making), then determine the suitability of the project.

The production of Android01 will share some production facilities and service divisions with Processor01. Fixed costs are $5 million per year, and will be assigned at the rate of 30 percent to Android01 and 70 percent to Processor01.

The variable cost of the production facilities and service divisions is $25 million per year. The square footage of factory space and labor needed for the production of 500 units of Processor01 and 300 units of Android01 are listed below.

Square FeetLaborProcessor01 (500 units)70,000 120Android01 (300 units)30,00080

The remaining cost for the production of Android01 is for components, at $25,000 per unit.

Question 1:In Method B, what would be the cost per unit of producing Android01 using factory space as the allocation basis? What would be the cost per unit using labor as the allocation basis?

Before starting on your calculations, review materials onproduction cost allocation.

Submit your Allocation of Costs Report and Calculations to the dropbox below. Submit a spreadsheet showing your calculations in Excel and provide a narrative analysis in Word. Please note thatnarrativein this Project does not mean audio. It rather means a presentation of the results of your analysis using words and the important numbers. Your narrative analysis should summarize the results of your analysis and make recommendations for the benefit of company.

An alternate method of assigning costs is activity-based costing.The major activities for the production of both Processor01 and Android01 are fabricator setup and component assembly. There are 500 units of Processor01 and 300 units of Android01 produced every year. There will be a total of 25,000 setups per year for at a total cost of $10 million. Each unit of Android01 will require 40 setups. There will be a total of 125,000 assemblies per year at a total cost of $15 million. Each unit of Android01 will require 180 assemblies. The remaining cost for the production of Android01 is for components, at $25,000 per unit.