PLC Sdn Bhd is a manufacturing company that has just commenced operations. The company intends to...

 

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PLC Sdn Bhd is a manufacturing company that has just commenced operations. The company intends to produce custom made fire proof doors for use in factory buildings and high-rise buildings. The company intends to use target costing for the pricing of its products. The production team has compiled the following data: 1. Expected sales volume 2. Production output Direct labor cost 3. 4. Direct material cost 5. Variable manufacturing overhead is charged to products on a labour hour basis 6. Fixed overhead manufacturing cost allocated to the products is estimated to be: 7. Estimated selling price per unit 8. Target profit margin Required: a) Explain the following concepts to pricing a product: i. Cost plus pricing ii. Target costing 500,000 units per year 10 units per labour hours RM90.00 per hour RM14.00 per unit of output Rate of RM120 per hour RM2,125,000 RM43.50 20% (2 marks) (2 marks) (5 marks) (3 marks) b) Compute the total unit cost of the product. c) Using target costing approach, compute the "cost gap""? d) Assess the action that the company needs to undertake to eliminate the "cost gap". (3 marks) PLC Sdn Bhd is a manufacturing company that has just commenced operations. The company intends to produce custom made fire proof doors for use in factory buildings and high-rise buildings. The company intends to use target costing for the pricing of its products. The production team has compiled the following data: 1. Expected sales volume 2. Production output Direct labor cost 3. 4. Direct material cost 5. Variable manufacturing overhead is charged to products on a labour hour basis 6. Fixed overhead manufacturing cost allocated to the products is estimated to be: 7. Estimated selling price per unit 8. Target profit margin Required: a) Explain the following concepts to pricing a product: i. Cost plus pricing ii. Target costing 500,000 units per year 10 units per labour hours RM90.00 per hour RM14.00 per unit of output Rate of RM120 per hour RM2,125,000 RM43.50 20% (2 marks) (2 marks) (5 marks) (3 marks) b) Compute the total unit cost of the product. c) Using target costing approach, compute the "cost gap""? d) Assess the action that the company needs to undertake to eliminate the "cost gap". (3 marks)

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Direct Material Cost Direct Labour Cost Variable Manufactur... View the full answer