Four years ago, your cousin Nikos set up Aphrodite Ltd, a small manufacturing company that manufactures shower screens. The business makes two models: Larnaca is the standard model and Paphos is the deluxe model. Both are made from frosted glass and have aluminium frames and fittings. Larnaca has plain glass and silver finish to the frame and fittings, whereas Paphos has an attractive design etched on the glass and a gold finish to the frame and fittings.

Once a year Nikos comes back to spend Christmas with the family. This year, knowing that you are studying management accounting as part of your course, he asks for your advice. He explains that despite a buoyant market and excellent sales figures, his profits have been very disappointing and he wants to embark on a cost¬ cutting exercise. After discussions, you find that he does not operate a standard costing system and does not seem to know what it is. However, he is very keen to learn, but he is only staying a few days, so he asks you to write to him in Cyprus with fuU details.

Write a letter to Nikos explaining the advantages of a standard costing system, how it can be implemented and the information he can expect to obtain.