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The Company Green Stream Inc. - located in Saint Tropez-France- sells golf equipments: clubs, bags, shoes, accessories... Sales are made on the national market and in Europe. Last year, its Managing Director- Mr. Wood -decided to launch a new range of products: golf trolleys. A trolley can help a golf player to carry his heavy bag (10 to 12 kg.) all along the 6km golf course. The company assembles and sells 2 models of trolleys The "Classic" model: in high strength aluminum - light weight. This model is foldable with removable wheels for an easier storage and transportation The "Electric model": with an electric engine and with arrangements providing a higher comfort and a very modern and nice design According to a recent market survey, the classic trolley market segment is threatened by the competition of specialist chains stores. The market segment is likely to be stagnating. On the contrary, the electric trolley market segment is supposed to increase by 20% per year. Hence, Mr. Wood wants to increase his electric trolleys production. He plans to re-allocate a part of the today's assembling area of "classic trolleys" for making more electric trolleys' and to launch a big advertising campaign You are the new controller of "Green Stream Company, and Mr. Wood relies on your analysis prior to make his final decision. He asked you to carry out two studies Questions 1-First Analysis: Current product costing Basing your analysis on the current cost structure of the Trolley Department of Green Stream Company (exhibit 1): 1-1. Please calculate the manufacturing cost, the full product costing and the margin of each trolley model per unit. Exhibit 2 : New Indirect costs allocation COST CENTER Supplying = 11 716,60 Assembling = 62 748 Activity Commercial Negotiation Order Management Components management Manual Assembly Automatic Assembly Quality control Sales Administration Delivery Activity Cost 5850 2 929.15 2 937,45 12 549,6 31 374 18 824.4 9179,3 6120,3 Distribution = 15 299,6 Mr Wood proposed the following cost drivers list: Supplying costs Activityll cost driver TOTAL nbr of Nbr. of cost drivers cost drivers for CLASSIC model Nbr. of cost drivers for ELECTRIC model 4 2 6 To be calculated To be calculated 23 433,20 Commercial Negotiation// nbr of suppliers Order management // purchasing costs Components management// nbr. of supplies category 10 Assembling costs Activityll cost driver TOTAL Nbr. of cost drivers for CLASSIC model Nbr. of cost drivers for ELECTRIC model 664 hours Manual assembly// nbr of direct labour hours 1 328 hours Automatic assemblyll nbr of machine hours 0,5 hour per 1,5 hour per trolley trolley 0,75 hour per 4.27 hour per trolley trolley 1 control per trolley trolley with a 3 times longer control 1 328 1 control per Quality Control// nbr. of trolleys controlled Distribution costs Activity// cost driver TOTAL Nbr. of cost drivers for CLASSIC model Nbr. of cost drivers for ELECTRIC model To be calculated To be calculated Sales administration// To be calculated production cost of each product Delivery// Weight of each delivered product 6 640 kg 5 kg 15 kg 2-Second Analysis: Activity Based Costing approach Mr. Wood would like you to study a new calculation of his trolleys costing. He thinks that indirect costs could be better allocated and he proposes you new keys for allocating activities cost (see Exhibit 2) 2-1. Using new activities costs allocation, how much is the product costing of each model (Classic and Electric)? Classic Model Electric Model Direct manufacturing cost per unit Manufacturing cost per unit Full costing Margin 7/11 Margin in % Detailed calculations on indirect costs with ABC method : You must use the template proposed in Exhibit 3 and Insert your calculations table. You may also use the excel table provided and send it back (2-2. Why is this costing different from the previous one (calculated in the first part)? 2-3. What would you suggest to Mr. Wood prior to undertake his new strategy of development on the Electric Trolley market