Preview File Edit View Go Tools Window Help 48% Thu 21 Apr 3:27 PM A phillypangminen Q = ACCT1068 Sem 1 2022 Main assessment Question paper_READ.pdf (page 2 of 4) Q 1 3 Q Q Search $44j0j4&sourceid=chrome&ie=UTF... (15 + 5 = 20 Marks) Case study 2 HEC Ltd manufactures two (2) products 'P' and 'Q' for the computer industry as follows: Product Annual production and sales Selling price per unit P 100,000 units $100.05 Q 50,000 units $150.00 Direct and indirect costs incurred on these two products are as follows: Particulars P Q Total Direct material cost 4,200,000 3,000,000 7,200,000 Direct labour cost 1,500,000 1,000,000 2,500,000 Direct machining cost 700,000 550,000 1,250,000 Indirect costs Machine setup cost 462,000 Testing cost 2,375,000 Engineering cost 2,250,000 --- Case study 2 continued on next page --- Page 2 of 4 RMIT Classification: Trusted 21 Aa6 Preview File Edit View Go Tools Window Help >{i '6? 48%[1- Thu 21 Apr 3:27 PM phillypangminen Q 0 55 @ ACCT1068 Sem 1 2022 Main assessment Question paper_READ.pdf (page 3 of 4) mm@ ll VHEDHHQSearch J ,, V, ., _, V, ., _, V, ., _, V, M ., _, V, M ., _, V, M ., _, V, M 4j0j4&sourceid=chrome&ie=UTF... a] c I] 33 35! --- Case study 2 continued --- Direct machining costs represents the cost of machine capacity dedicated to the production _ of each product. These costs are xed and are not expected to vary over the long-term. Additional information: Particulars P 0 Production batch size 1,000 units 500 units Set-up time per batch 30 hours 36 hours Testing time per unit 5 hours 9 hours Engineering cost $840,000 $1,410,000 A foreign competitor has introduced a product very similar to product 'P'. To maintain the company's market share and protability, HEC Ltd will have to reduce the selling price of 'P' to $86.25. The company calls for a meeting and comes up with a proposal to change the design of product 'P'. The expected effect of new design is as follows: 0 Direct material cost is expected to decrease by $5 per unit. 0 Direct labour cost is expected to decrease by $2 per unit. 0 Machine time is expected to decrease by 15 minutes, previously it took 3 hours to produce 1 unit of 'P'. . Set-up time will be 28 hours for each set-up. . Time required for testing each unit of 'P' will be reduced by 1 hour. 0 Engineering cost and batch size will be unchanged. Assume cost per unit of cost drivers for the new design remains unchanged. until-s 630 ''EiIQIQG? U" AWE. 6 Preview File Edit View Go Tools Window Help >{i '' 48%[I- Thu 21 Apr 3:27PM phillypangminen Q 0 EE 0 0 Lab] ACCT1068 Sem 1 2022 Main assessment Question paper_READ.pdf (page 3 of 4) .VL 3 Q / ii! i V'Ei'i W'iQSearch i W T ' ' ' ' h ' ' ' h ' ' ' ' V ' F' " ' ' " WWW\"4j0j4&sourceid=chrome&ie=UTF... LT] '13! I] compay's market share and protability, HEC Ltd will have to reduce the selling price of 'P' to $86.25. The company calls for a meeting and comes up with a proposal to change the design of product 'P'. The expected effect of new design is as follows: 533 . Direct material cost is expected to decrease by $5 per unit. . Direct labour cost is expected to decrease by $2 per unit. 0 Machine time is expected to decrease by 15 minutes, previously it took 3 hours to produce 1 unit of 'P'. - Set-up time will be 28 hours for each set-up. 0 Time required for testing each unit of 'P' will be reduced by 1 hour. 0 Engineering cost and batch size will be unchanged. Assume cost per unit of cost drivers for the new design remains unchanged. Required (a) Calculate the full cost per unit of 'P' and '0' before the product 'P"s redesign proposal was made. (b) Determine the current mark up on full cost per unit of 'P' based on your answer to requirement (a) above. Also, determine the target cost per unit for the redesigned product 'P' to maintain the same markup percentage on full cost per unit as it had earlier. (c) Evaluate if the new design for product 'P' achieves the cost reduction target. Show all calculations in detail. (7+3+5=15Marks) IND-6:330 'i'n'iithQGowUuAr-W; .HQQh g: 8E1