Stawberry Ltd. Is a manufacturing company which produces various types of luxury furnitures for high-income consumers. The
Question:
Stawberry Ltd. Is a manufacturing company which produces various types of luxury furnitures for high-income consumers. The company is planning to launch its latest product which is called Golden Chair. Previously, the company used target pricing technique in setting the sales price. However, the new management director who recently joined the company, had asked the Accountant to make a study on the possibility of using target costing technique.
The following information has been gathered by the Accounts Department. Target Selling Price (based on competitors' price in the market):
350$ Profit Margin (based on company policy)
20% Direct Material per unit (actual)
145$ Direct labour (actual)
50$ Indirect expenses (actual)
75$ Fixed Overhead (actual)
80$ Notes: All cost above are based on unit per basis.
Question: determine the target costing and the actual costs incurred for the new product along with your workings. Based on your answers, conclude the current costs incurred.
Essentials of Statistics for Business and Economics
ISBN: 978-1305081598
7th edition
Authors: David Anderson, Thomas Williams, Dennis Sweeney, Jeffrey Cam