Answer Happy

QUESTION 2 Open with Cool Equipment manufactures and sells portable fridges. The company is planning to introduce its newest portable fridge model - 40FX. The average cost of producing and selling one unit of 40FX follows (based on budgeted production and sales of 10,000 units): Direct materials Direct labours Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling expense There is an identical product of a comparable quality in the market that sells for RM350 per unit. Required: Each question should be treated independently. 1. Assume RM 150.00 92.50 20.00 27.50 6.00 4.00 Page 2 1 2 marks) (6 marks) 3. Assume that the company uses target costing and desires to meet the market price. i. By how much of the current cost should be reduced if the company requires a 25% markup on absorption cost? ii. Suppose the manufacturing costs of 40FX cannot be made at its target cost. List TWO other options available for the company to meet the target cost. (7 marks) TOTAL: 20 MARKS]