Please tackle the question and can't plagiarize. Must explain the answer with the own words.

Question

Fantastic Co. (Fantastic) starts its business in 2021. It manufactures and sells premium orange

juice in bottles. The following data relating to first year operation is extracted.

Number of gallons produced 150,000

Number of gallons sold 140,000

Selling price $6 per gallon

Direct material used per gallon $2 per gallon

Direct labor used per gallon $0.9 per gallon

Total fixed manufacturing overhead cost $228,000

Total fixed selling, distribution and administrative expense $171,900

REQUIRED:

(a) Prepare Fantastics absorption costing income statement for the year 2021.

(b) Explain why the use of absorption costing would lead to motive to overproduce.

(c) The unit selling price expected in the market will be $5 per gallon next year due to keen competition. With target profit of 8% of the market price,

(i) what is the unit target cost per gallon?

(ii) suggest THREE ways to meet the target cost by Fantastic.

(d) The Production Director suggested to set up a Just-in-time inventory system by having an e-platform accepting electronic order of orange juice starting from 1 January next year. He believed the e-platform can help Fantastic to save substantial costs as order is processed electronically and production level can be adjusted easily to address customer demand. The Sales Director supported the suggestion as he can introduce new sales initiative by offering customers personalized bottle of orange juice. Customers can design their own logo to be printed on the bottle bought. If based on existing operation, it is not possible to introduce this new initiative as cost is too high. He believed this new sales initiative will bring in 20% increase in sales.

(i) What are the costs of holding inventory at present?

(ii) What are the potential financial benefits of Just-in-time inventory system to Fantastic?