11/11 Tests Question 5: ABC, Strategic Management Accounting, and Transfer Pricing JBL Co operates an activity-based costing system and has forecast the following information for next year. Cost pool Cost Cost Driver Number of Drivers Production set-ups 210,000 Set-ups 600 Product testing 300,000 1,500 Component Supply and 50,000 Component Orders 1,000 Storage Customer Order and Delivery 112,500 Customer Orders 1.000 JBL Co expects 160 customer orders for Product ZT3 next year, which translate to 10,000 units. For the production of these 10,000 units, the following data are given. The company holds no inventories of Product ZT3 and will need to execute 10 set-ups. Also, 40 production tests are required to ensure that quality standards are maintained. Finally, 10 component supply orders are anticipated to be executed. The following additional cost and profit information relates to the production of one of product ZT3: Component cost: $1.00 per unit Direct labour: 10 minutes per unit (1/6 of 1 hour) at 7.80 per hour Profit mark up: 40% of total unit cost Required a) Calculate the activity-based (ABC) recovery rates for each cost pool. (4 marks) b) Calculate the ABC overhead cost per unit. (8 Marks) c) Calculate the unit variable cost, the total unit cost, and the selling price of Product ZT3. (3 marks) Evaluate how each of the following techniques addresses the weaknesses of conventional management accounting: d) Kaizen costing (5 Marks) e) Target Costing (5 Marks) 1) Just-in-Time (JIT)