Assume that you are the management accountant at Zelda Limited, a manufacturer of cables for the...

 

Transcribed Image Text:

Assume that you are the management accountant at Zelda Limited, a manufacturer of cables for the telecommunication industry. During the coffee break, you are having a conversation with Sandy, another colleague in your office. Sandy is confused about the differences and similarities between target costing and kaizen costing. Another colleague, Kevin, overhears your conversation with Sandy and insists that neither of these methods is beneficial. Kevin argues that some companies run into financial problems using these methods because their managers manipulated the cost estimates to appear however they wanted. If the managers wanted to launch a new product or keep an old one, they made sure their cost estimates supported their decision. Required: Write a summary report to explain the following to Sandy and Kevin. • How target costing and kaizen costing are different. • • Compare the information needed to apply the target costing and kaizen costing methods (hint: mention the types of relevant information needed for each method) Ways in which managers might be able to create biased estimates under a target or kaizen costing system. Consider the environmental costs expended by Zelda Limited (your company) and its main competitors. Appraisal costs Internal External failure costs Zelda Ltd Dextra Ltd Creata Ltd Required: Prevention costs $20,000 $45,000 $100,000 $25,000 $67,000 $25,000 failure costs $5,000 $120,000 $0 $10,000 $240,000 $0 Comment on the relative proportions of each of the four categories of quality costs at Zelda Limited. Write a short paragraph explaining how Zelda Ltd is managing its environmental performance compared to its competitors. Assume that you are the management accountant at Zelda Limited, a manufacturer of cables for the telecommunication industry. During the coffee break, you are having a conversation with Sandy, another colleague in your office. Sandy is confused about the differences and similarities between target costing and kaizen costing. Another colleague, Kevin, overhears your conversation with Sandy and insists that neither of these methods is beneficial. Kevin argues that some companies run into financial problems using these methods because their managers manipulated the cost estimates to appear however they wanted. If the managers wanted to launch a new product or keep an old one, they made sure their cost estimates supported their decision. Required: Write a summary report to explain the following to Sandy and Kevin. • How target costing and kaizen costing are different. • • Compare the information needed to apply the target costing and kaizen costing methods (hint: mention the types of relevant information needed for each method) Ways in which managers might be able to create biased estimates under a target or kaizen costing system. Consider the environmental costs expended by Zelda Limited (your company) and its main competitors. Appraisal costs Internal External failure costs Zelda Ltd Dextra Ltd Creata Ltd Required: Prevention costs $20,000 $45,000 $100,000 $25,000 $67,000 $25,000 failure costs $5,000 $120,000 $0 $10,000 $240,000 $0 Comment on the relative proportions of each of the four categories of quality costs at Zelda Limited. Write a short paragraph explaining how Zelda Ltd is managing its environmental performance compared to its competitors.

Answer rating: 100% (QA)

Target costing is used during the design stage whereas Kaizen costing is used at the produ... View the full answer