Alameda Instruments (AI) has offered to supply the Air Force with computer monitors at "cost plus 20 percent." AI operates a manufacturing plant that can produce 22,000 monitors per year, but it normally produces 20,000. The costs to produce 20,000 monitors follow:

Alameda Instruments (AI) has offered to supply the Air Force with computer monitors at "cost plus 20 percent." AI operates a manufacturing plant that can produce 22,000 monitors per year, but it normally produces 20,000. The costs to produce 20,000 monitors follow:

	Total Cost			Cost per Monitor
Production costs:
Materials	$	1,340,000		$	67
Labor		1,860,000			93
Supplies and other costs that will vary with production		860,000			43
Indirect cost that will not vary with production		640,000			32
Variable marketing costs		1,720,000			86
Administrative costs (all fixed)		1,060,000			53
Totals	$	7,480,000		$	374

Based on these data, company management expects to receive $448.8 (= $374 × 120 percent) per monitor for those sold on this contract. After completing 2,000 monitors, the company sent a bill (invoice) to the government for $897,600 (= 2,000 monitors × $448.8 per monitor).

The president of the company received a call from an Air Force auditor, who stated that the per monitor cost should be

Materials	$	67
Labor		93
Supplies and other costs that will vary with production		43
	$	203

Therefore, the price per monitor should be $243.6 (= $203 × 120 percent). The Air Force ignored marketing costs because the contract bypassed the usual selling channels.

Required:

What is the price per computer monitor that should be charged by Alameda Instruments under the following options for considering the cost basis of the monitors? (Round your intermediate calculations to 2 decimal places and your final answers to 2 decimal places.)

Options:
A.	Only the differential production costs are used as the cost basis.
B.	The total cost per monitor for normal production of 20,000 monitors are used as the cost basis.
C.	The total cost per monitor for production of 22,000 monitors, excluding marketing costs, are used as the cost basis.
D.	The total cost per monitor for production of 22,000 monitors, including marketing costs, are used as the cost basis.

Explanation:

Costs				Unit Cost Options (One Unit = One Monitor)
					A			B			C			D
Materials (variable)	$	67.00		$	67.00		$	67.00		$	67.00		$	67.00
Labor (variable)		93.00			93.00			93.00			93.00			93.00
Supplies (variable)		43.00			43.00			43.00			43.00			43.00
Indirect costs (fixed)		640,000			N/A			32.00	a		29.09	b		29.09
Marketing (variable)		86.00			N/A			86.00			N/A			86.00
Administrative (fixed)		1,060,000			N/A			53.00	c		48.18	d		48.18
Per monitor cost basis				$	203.00		$	374.00		$	280.27		$	366.27
Per monitor price (Cost + 20%)				$	243.60		$	448.80		$	336.32		$	439.52

a	$32.00 = $640,000 ÷ 20,000 units.
b	$29.09 (rounded)  = $640,000 ÷ 22,000 units.
c	$53.00 = $1,060,000 ÷ 20,000 units.
d	$48.18 (rounded) = $1,060,000 ÷ 22,000 units.