Develop ABC to Clear the Mess up

TESLA TESLA MOTORS V Background: Elon Musk, the man who is responsible for revolutionizing the automotive space is confused. Why you ask? Well - he met with Ms. Static who explained to him that under the current allocation system, engineering costs amount to $46,880 per Model S and $15,630 per Model X. Elon responds: "How-Look at the Model X - its freaking awesome and is insanely over engineered. How can it cost less than our base model?" He decides to hire you as a consultant to drive transparency into the costs... MODELS MODEL X - Problem: Develop ABC to clear the mess up... Cost Pool Machine Setup Materials Handling Utility Activity Costs $360,000 $100,000 $40,000 Cost Driver Setup Hours Materials (lbs) Kw/hr Driver 4,000 20,000 40,000 Information by Product Units Direct Materials Direct Labor Setup Hours Materials Kw/Hr Models 4,000 $42,000 $24,000 200 1,000 2,000 Model X 20,000 $54,000 $40,000 240 3,000 4,000 i. What is the "true" profitability of Model S and Model X ii. What / how do you suspect Ms. Static arrived at her numbers? iii. Knowing Tesla's business are there additional things that you would look into in cost allocation? (Remember: Tesla has significant costs related to battery, R&D, software programming, QAing etc.) iv. Should Tesla evaluate customer profitability analysis or product profitability analysis? Defend your choice with at least 2 advantages