Advanced cost management accounting

Risky Business Limited manufactures and sells a fruit cake. The company utilises the traditional costing system. System uses a single OAR to absorb all overheads within each department. Currently the entity has two departments: Bakery and packaging. Below are the budgeted overheads and the budgeted activity levels in both departments: $1,400,000 $1,600000 [ns . ection $2,200,000 $1,300,000 $1,400,000 $1,100,000 100,000 400,000 Labour hours 500,000 20,000 During the period ended June 30, 2014, the company incurred the following per unit costs below. Additionally, it was ascertained that direct material cost on average $100 per kilogram while, direct labour is $40 per hour. Direct material ner unit in kilo_rams Direct labour per unit: Bakery Direct labour aer unit: Packa ' Machine hours per unit: Bakery 1 Machine hours per unit: Packaging 4 Management's policy to adopt a target costing to estimate the targeting cost of its products. For this reason, a market research was conducted which yield a target selling price of $800. Management also has a targeted prot margin of 25%. Required: a. Calculate the projected total cost of the fruit cake b. Calculate the targeted cost c. Determine the target gap d. Highlight some possible techniques that management could use to reduce the target gap identied above Target costing