Question $2$

Bella Bhd$.$ is an electrical and electronics manufacturing company. For many years, Bella Bhd has been profitable; however, it has recently lost considerable business to foreign competitors that have become very aggressive in the marketplace. Bella Bhd has used a straightforward cost$-$plus pricing system, marking its goods up approximately $25$ percent of total cost. A further investigation on its competitors suggests that these firms have been using target costing system.

An example of Bella's problem is typified by item code name Alpha, which has the following unit$-$cost characteristics:

expenses

The going market price for an identical product of comparable quality is RM$195,$ which is significantly below what Bella is charging.

Dikehendaki$/$Required:

$($a$)$ Contrast cost$-$plus pricing and target costing. Which of the two approaches could be aptly labeled price$-$led costing? Why?

$(2$ markah$/$marks$)$

$($b$)$ What is Bella's current selling price of Alpha?

$(3$ markah$/$marks$)$

$($c$)$ If Bella used target costing for Alpha, what must happen to costs if the company desires to meet the market price and maintain its current rate of profit on sales? By how much?

$(3$ markah$/$marks$)$

$($d$)$ Would the identification of value$-$added and non$-$value$-$added costs assist Bella in this situation? Briefly explain.

$(2$ markah$/$marks$)$