Instruction to students: This is an individual assignment.
Mark: 20%
Word count: 2000 words approximately. In a report format.
Task: ACC200 Report Assignment
Fantori Ltd has been in business for few years manufacturing sewing machines. It currently manufactures two models, the basic and advance. Last year, 2017 they made good profit and they were happy their business is running well. They are about to enter a new phase in their business, selling to an overseas buyer. However, they are a bit confused as to why the buyer is only interested to buy the advance model and not the basic or both. For product costing purposes the business uses the traditional costing system and machine hours to assign indirect cost to the sewing machines as they are fairly new in business and don’t want to spend too much money to implement a more refined costing system-they are making profit, why change things?
The following information has been supplied to you regarding the business for the year 2017.
Basic Model
Units produced and sold: 1700
Direct material cost per unit: $350
Direct Labour cost per unit: $175
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Advance Model
Units produced and sold: 1600
Direct material cost per unit: $580
Direct labour cost per unit: $280
The total indirect/overhead costs and activities are as follows:
Inspection: $30 000
Assembly: $100 000
Production Scheduling: $110 000
Machine set-up: $40 000
Required: ACC200 Report Assignment-King’s Own Institute Australia
- Calculate cost per unit of the two models of sewing machines under the current traditional costing system.
- Calculate cost per unit of the two models of sewing machines under Activity based Costing.
Sewing easy sells the advance model at a price of total cost (under the current costing system) plus 30%and is willing to give the same selling price to the overseas buyer. The overseas buyer wants to purchase only the advance model. Prepare December 2017 Profit and Loss Statement for the advance model where (a) traditional costing is used to calculate the product cost (b) Activity Based Costing is used to calculate the product cost. Analyse why the overseas buyer is interested to buy only the advance model. In your discussion you should highlight the importance of accurate product costing.
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