SECTION C CASE STUDY Activity-based conting: traditional conting manufacturer Total marks for this question: 20 mars Suggested Time: 35 minutes Lollie Koto Ply Lid manufactures a wide range of delicious cokes and pastries. At the amuel Christmas party the company's owner, IM, Koto treated his employees to nostalgic review of the tim's history, he told them Twenty years ago, we had only three product lines-ples finger burs and lomington We were flot our producing large volumes of each product using very simple machinery and a lot of hard work Myl How times have changed We til make and sell a lot of pies and omingtons, but we ho produced wide range ollow volume lines, such as Donah parties, doughnuts and von Nices I hear you sighing, and no wonder these low volume productore a pain in the neck They are complex to produce and the short production runs Involve a lot of extra mochinery setups and material handling. Bu the accountants et me that these specially ines have wonderful profil morgins so we must not compion Katothen gotined the domate changes that had occurred within the business over the past 20 years in the factory he had seen the introduction of computer-controlled ming machines and over that replaced a lot of the reclabour Operations and an increased emphasis on quality and delivery performances. Indeed, right across the business more ond more effort had been placed to keep customer happy However, this speech cost a gloomy shadow across the Christmas festivities when he wood Despite of this progress, the company seems to be strugging. Our profits are declining and things don'improve over the next few months, the may be ourist Crisimas together. To survive, we must al work very hard. We must forecast on increasing sales porlicuiony of our high-margin speciality products The company's management accountant, on lonne, had become concerned about the conventional product conting system Craving for Cakes. The manufacturing people were to sure that the calling system was distorting product costs REQUIRED Descnbe the changes in cost structure that are kely to have occur at Craving for Cakes over the last 20 yech and explain their couses & maria 2. Do you thing at the existing costing system understates or overstates the cost of a. Lamington b. Danish pastrios Explain your arswer. S marka 3 Activity-based costing has the potential to improve the crocy of product cost, however, irortant for management to understand its limitations Asest Tarvo Identity and sufficiently explain the three mans marks SECTION C CASE STUDY Activity-based conting: traditional conting manufacturer Total marks for this question: 20 mars Suggested Time: 35 minutes Lollie Koto Ply Lid manufactures a wide range of delicious cokes and pastries. At the amuel Christmas party the company's owner, IM, Koto treated his employees to nostalgic review of the tim's history, he told them Twenty years ago, we had only three product lines-ples finger burs and lomington We were flot our producing large volumes of each product using very simple machinery and a lot of hard work Myl How times have changed We til make and sell a lot of pies and omingtons, but we ho produced wide range ollow volume lines, such as Donah parties, doughnuts and von Nices I hear you sighing, and no wonder these low volume productore a pain in the neck They are complex to produce and the short production runs Involve a lot of extra mochinery setups and material handling. Bu the accountants et me that these specially ines have wonderful profil morgins so we must not compion Katothen gotined the domate changes that had occurred within the business over the past 20 years in the factory he had seen the introduction of computer-controlled ming machines and over that replaced a lot of the reclabour Operations and an increased emphasis on quality and delivery performances. Indeed, right across the business more ond more effort had been placed to keep customer happy However, this speech cost a gloomy shadow across the Christmas festivities when he wood Despite of this progress, the company seems to be strugging. Our profits are declining and things don'improve over the next few months, the may be ourist Crisimas together. To survive, we must al work very hard. We must forecast on increasing sales porlicuiony of our high-margin speciality products The company's management accountant, on lonne, had become concerned about the conventional product conting system Craving for Cakes. The manufacturing people were to sure that the calling system was distorting product costs REQUIRED Descnbe the changes in cost structure that are kely to have occur at Craving for Cakes over the last 20 yech and explain their couses & maria 2. Do you thing at the existing costing system understates or overstates the cost of a. Lamington b. Danish pastrios Explain your arswer. S marka 3 Activity-based costing has the potential to improve the crocy of product cost, however, irortant for management to understand its limitations Asest Tarvo Identity and sufficiently explain the three mans marks