Note: The above analysis (Bill of Activities and costs) accounts for direct labour and mqfacfurmg overhead activities Direct material cost per unit is $3 .00 Required: 1. Calculate Turn Turn Foods Ltd (TTFL) cost per 1kg pack of baked luncheon under the existing absorption costing system. [3 marks) Suggest three reasons why Yum Foods Ltd (YFL) may be able to sell its product at $3.50 over longer term. (3 marks) Calculate the cost per unit for TTFL's luncheons using activitybased coating (7 marks) What target cost would TTFL have to set for its luncheons if it wished to match the YFL's price and maintain. its existing markup? (3 marks) . By what amount TTFL should decrease its cost to compete with YFL's price? (3 marks) Identify four non-value-added activities from T'I'FL's bill of activities to produee hmcheons. (2 marks) Suggest two possible root cause cost drivers for each of the nonvalue added activities identied in {6) above [4 marks) Question 1 25 marks Tum Tum Foods Ltd ('ITFL) is a manufacturer of Baked Luncheon and other meat products. Recently, TIML's major high-volume selling product, Baked chicken Luncheon, has come under intense pressure from its competitor, Yum Foods Ltd (YPL). YFL uses modem manufacturing processes. TI'FL's Baked chicken Luncheon sells for $10.00 per 1kg pack, based on a costplus pricing system. TIFL applies manufacturing overhead using a plant-wide overhead rate based on the number of direct labour hours worked. Prices are based on absorption cost plus a 40% markup. YFL sells its Baked chicken Luncheon for $8.50 per 1kg pack. The owner and manager of 'I'I'FL, Shaun Murphy, is now getting concerned about the sales of their product as the competition from YFL is ercely tearing down their business. Murphy' 5 elder son informs his dad about Activity based costing that he has recently learnt at the university and says that they need to relook at the costing method of their product. Murphy: If you want to work on your new costing method, go ahead. With the help of his family members, the elder son developed activity-based costing (ABC) system and identified the following bill of activities for the production: Annual] volume: 10,000 1kg packs Batch size: 250 1kg packs Quantity of activity Cost per unit activity driver used driver 30 inspections $50 per inspection 200 kg 80 barrow loads 40 loads 5000 kg 60 loads 80 barrow loads 60 loads 60 loads 60 loads 80 barrow loads 10000 skins 500 trolley loads 500 trolley loads Activity Inspect meat 54 per kg 53 per barrow $30 - r load $2.50 per kg $25 per load $15 per barrow $20 per load $40 per load $20 per load $10 per barrow $0.50 per skins $8 per trolley $15 - - r trolley Disposal of poor meat Move to minoiug room Load minoer\" Unload mineer\" Move to mixing room Load mixer" Unload mixer\" Move to packing room Pack meat into skins Move to Smokehouse Move to truck * These activities must be performed more than enca per batch because of the limited capacity per machina. 1