ACC1211 MANAGEMENT ACCOUNTING FUNDAMENTALS TOPIC 7- PRICING DECISION COST-PLUS PRICING AND TARGET COSTING Exit Question 2 The MAB13 and RAS17 are two types of bicycle market by LALA Pte Ltd. MAB13 is a simple type while RAS17 incorporates the technologies features that make the demand higher than MAB13. Recently, a new competitor entered the market that is priced at RM5 more than RAS17's total cost. During the past years, the company has added a standard 20% markup on full cost to all its models. All costs related to the production and distribution of the two models, are as follows: Required: Cost per unit Direct materials Direct labours Manufacturing overhead Selling and administrative MAB13 RAS17 RM100 RM200 RM120 RM240 RM40 RM60 RM35 RM50 1. Calculate the target selling price for both models using the cost-plus pricing. 2. Assume LALA's management plans to use target costing for RAS17 to remain competitive, a. calculate the selling price that would be charged for RAS17? b. what would be the highest acceptable target cost? c. by how much must the current total costs change to meet the target cost in (b)? 3. Refer to the information in requirement (2). Suppose approximately 45% of manufacturing costs for RAS17 consist of materials that are purchased from suppliers. Key suppliers on the target costing team have suggested process improvements that will reduce supplier cost by 20%. Will this help LALA achieve its target cost? Explain and show your computation