is due to celebrato its 100 annivenary sext year. To mark the occasion, X Ltd. intends to produce a sports car: the model Royal. As this will be special edition production will be limited to 1,000sumbers of Model Reyal cans is considering using a target costing approach and has conducted market research consumers require in a spot car. Based on this market decide to price is the to detenmine the features dhat research and knowledge of competitor's products, company mast model royal at Rs. 975lacs Company requires an operating profit margin or 25% orthe selling price of the ca. Details of the forthooming year are as follows: Foeccast of direct costs foe a model royal car - Rs. 2,50,000 Rs. 4,75,000 Material Forecast ef annual overheads costs In lacs 2310 Cost driver See note l See note 2 Production line cost Transportation cost Note 1: The production machine hour per day. The production hour per car. This production working at full capacity line that would be used for Model Royal has a capacity of 60,000 ine time required for model royall car is 6 machine lien will also be used to make other cars and will be time Some models of cars are delivered to showrooms using car tramsports, 60% of the transportation costs are relatedto the number of deliveries made. 40% of the eransportation costs are related to the distance travelled The transporters have forecast to make a total of 640 deliveries in the year and carry 10 cars each time. The car transporter will always carry its maximm capacity of 10 cars. The total annual distance travelled by car transporters is expected to be2 .25,000 kms 50,000 kms ef this is for the delivery of model royal only. All 1,000 models royal cars A. Calculate the forecast total cost of producing and delivering a model royal car using B. Calculate the cost gap that curmently exist between the forecast total cost and the target produced will be delivered in the year using the car transporters Required: activity based coting principles to assign the overhead costs. total cost of a model royal car [10 Scanned by CamScanner