Recently, the Finance Director attended a workshop about the life cycle and target costing and she suggested the use of these techniques before making the final decision about the project. So the management accountant was asked to conduct further research and provide the additional information required for applying these techniques. Doing so the management accountant has come with the following information:

Forecasted number of gaming desks to be made and sold:

Year

Year

Year

The suggested selling price is to be per desk in the first year, rising in line with inflation which is currently expected to be per annum.

Variable production costs are expected to be per desk in year and this consists of cost of material, cost of labour and other variable costs, however, these types of costs are expected to increase by and respectively per annum.

For the first year, fixed storage costs attributed to the gaming desks are correctly forecast at and this is subject to inflation at per annum.

The marketing cost is estimated to be in the first year, falling by per annum in each of the next years.

The profit margin on gaming desk is at and Marple Ltd would expect the profit margin to be achieved by the third year of production.

Required:

e Using the additional information provided by the accountant only, calculate the cost gap per unit for each of the first three years of the products life and discuss the implication of this on the ability to achieve the required profit margin of

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f Advise on the extent to which Target Costing would help Marple Ltd to achieve their objective to bring this new product to the market.

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g Define and discuss whether Just In Time JIT can help the company to achieve the companys required profit margin.