cost accounting

Project Description:

cuttingedge is an electronic company, which produces one major type of mobile phones.
this phone occupied around 40% of market share last year. recently the price decreased
quickly due to the active price move of one overseas manufacturer. the current selling
price is $580 with $80 profit for each unit. the ceo of cuttingedge, john simpson was
concerned about the ongoing profit of the company under such highly competitive
situation. he was considering the price deduction from $580 to $440 to match the overseas
company. cuttingedge would not make any profit out of this matching price. to decide the
reasonable cost reduction john appointed solution, a famous consultancy company
specialised in cost benefit strategy based in sydney, to investigate the issue and provide
useful information for decision making.
solution had identified the costs as the following:
batch‐level:
equipment implementation $155,000
material handling $125,000
phone testing $120,000
product‐sustaining:
dealing with customer complaints $190,000
engineering support $170,000
warranties $230,000
storing $120,000
expediting $180,000
unit‐level:
materials: $750,000
power: $140,000
assembling: $350,000
other direct labor: $270,000
total: $2,800,000
as a junior consultant in solution, you are required to prepare the documents to address the
following issues:
1. define activity‐based management.
2. identify two dimensions of abm model.
3. specify how does abm connect to continuous improvement?
4. your team leader had reported in a meeting with john that cost per unit could possibly be
reduced by at least $160. can you prove that it is correct after relevant calculations? identify
non‐value‐added costs and provide the calculations on cost savings per phone set if those
costs were eliminated. to reduce or eliminate those costs, what kind of actions shall be
taken?
5. what is the target cost to match the price and also achieve the profit per unit of $100?
for question 4 and 5, you are required to use the spreadsheets for all the calculations. input,
processing and output sheets are required to present your work.
marking sheet
requirements marks
allocated
marks
achieved
activity‐based management 2
two dimensions of abm model 2
connections to continuous improvement 2
cost calculations 5
target cost 2
presentations 2
total 15
Skills Required:
Project Stats:

Price Type: Negotiable

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