This assignment is a continuation of the previous assignments where you will focus more on your company, Universal Drones Inc., and VectorCal. You will make more assumptions on specific types of costs.

Page Contents

QUESTION

Compare your company with VectorCal relative to the price of acquisition, semi-variable costs, and allocated direct and indirect costs of the drone navigation system. Justify the response.

Assignment Instructions

Write a 2–3 page paper in which you:

Analysis of Universal Drones, Inc.’s expenses
- Analyze and provide examples in detail the following costs that both Universal Drones and VectorCal will incur when contracting with the government.
  - Labor costs.
  - Manufacturing costs.
  - Research and development.
  - General administrative expenses.
Analysis of Direct and Indirect Costs
- From the previous section define and indicate which costs will be direct and indirect.
  - Direct costs.
  - Labor.
  - Manufacturing.
  - Research and development.
  - General & administrative expenses.
- Indirect Costs
  - Labor.
  - Manufacturing.
  - Research and development.
  - General & administrative expenses.
Allocation Methods
- Discuss the following cost allocation methods and indicate which ones that Universal Drones, Inc., and VectorCal would use. Remember to provide a rationale for each of these methods.
  - Units of production method.
  - Machine hour method.
  - Direct labor hour method.
  - Direct labor cost method.

Additional Notes:
- Refer to the rubric for this assignment to become familiar with how your paper will be graded.
- Refer to scenarios and readings from previous weeks in order to complete this assignment.
- You may use the Analysis of Direct Material and Other Direct Costs Case Analysis [DOCX] to assist you with formatting and completing the paper.

Your assignment must follow these formatting requirements:

This course requires the use of Strayer Writing Standards. For assistance and information, please refer to the Strayer Writing Standards link in the left-hand menu of your course. Check with your professor for any additional instructions.
Use at least three quality resources in this assignment. Note: Wikipedia and similar websites do not qualify as quality resources.
The Strayer University Library is a good source for quality resources.

The specific course learning outcome associated with this assignment is:

Evaluate company pricing and costs related to production.

ANSWER

Title: Comparative Analysis of Universal Drones Inc. and VectorCal in Terms of Acquisition Price, Semi-Variable Costs, and Allocated Direct and Indirect Costs of the Drone Navigation System

Introduction:
In this paper, we will compare Universal Drones Inc. and VectorCal with respect to the price of acquisition, semi-variable costs, and allocated direct and indirect costs of the drone navigation system. We will analyze various expense categories such as labor costs, manufacturing costs, research and development, and general administrative expenses to provide a comprehensive understanding of the cost structure of both companies. Additionally, we will discuss the allocation methods that Universal Drones Inc. and VectorCal would likely use for cost allocation.

Analysis of Universal Drones Inc.’s Expenses

1. Labor costs:
Labor costs encompass the wages and salaries paid to employees involved in the production, assembly, testing, and support of the drone navigation system. Examples of labor costs for Universal Drones Inc. may include salaries of engineers, technicians, production workers, and support staff.

2. Manufacturing costs:
Manufacturing costs involve expenses incurred during the production process of the drone navigation system. This includes raw materials, direct labor, and overhead costs. For Universal Drones Inc., manufacturing costs could include the cost of components, assembly line labor, equipment depreciation, and utility expenses related to the production facilities.

3. Research and development:
Research and development costs pertain to the investment made in designing and improving the drone navigation system. Universal Drones Inc. may allocate funds towards research and development activities such as prototyping, testing, software development, and exploring new technological advancements to enhance the performance and features of the drone system.

4. General administrative expenses:
General administrative expenses include the costs associated with managing the overall operations of the company, such as salaries of executives, legal fees, office rent, utilities, and general office supplies. Universal Drones Inc. would incur general administrative expenses for activities like finance, human resources, marketing, and administrative support functions.

Analysis of Direct and Indirect Costs

1. Direct costs:
Direct costs are expenses that can be directly traced to the production of the drone navigation system. In the case of Universal Drones Inc., the following costs can be considered as direct costs:

– Labor: Wages and salaries of employees directly involved in the production, assembly, and testing of the drone navigation system.
– Manufacturing: Costs of raw materials, components, and equipment directly used in the production process.
– Research and development: Expenses directly associated with the design and development of the drone navigation system.
– General & administrative expenses: Costs specifically incurred for activities related to the production and development of the drone system, such as salaries of production supervisors or R&D managers.

2. Indirect costs

Indirect costs are expenses that cannot be directly attributed to the production process but still contribute to the overall operation of the company. Indirect costs for Universal Drones Inc. can include:

– Labor: Salaries of employees indirectly supporting production, such as maintenance staff or quality assurance personnel.
– Manufacturing: Indirect manufacturing costs like facility maintenance, equipment depreciation, and factory utilities.
– Research and development: Indirect R&D costs, such as shared research facilities or general R&D administration.
– General & administrative expenses: Indirect costs like shared office space, general company-wide utilities, and salaries of non-production staff.

Allocation Methods

1. Units of production method:
Universal Drones Inc. and VectorCal would likely use the units of production method to allocate costs. This method allocates costs based on the number of units produced. It is suitable when the production volume directly relates to the consumption of resources and costs.

2. Machine hour method:
Both companies could use the machine hour method for allocating costs. This method allocates costs based on the usage of machines or equipment in the

production process. It is suitable when the operation of machinery directly influences the consumption of resources.

3. Direct labor hour method:
The direct labor hour method could be employed by Universal Drones Inc. and VectorCal. This method allocates costs based on the number of hours worked by direct labor employees. It is suitable when direct labor is a significant cost driver in the production process.

4. Direct labor cost method:
Universal Drones Inc. and VectorCal may also use the direct labor cost method for cost allocation. This method allocates costs based on the actual wages and benefits paid to direct labor employees. It is suitable when the labor cost is a major component of the overall costs.

Conclusion

Universal Drones Inc. and VectorCal incur various expenses related to labor, manufacturing, research and development, and general administrative functions. The direct and indirect costs associated with these expense categories play a significant role in the cost structure of both companies. By utilizing appropriate cost allocation methods, such as units of production, machine hour, direct labor hour, and direct labor cost methods, both companies can allocate costs accurately and enhance their pricing strategies and cost management practices.

Complete Answer: