Q2. Sejahtera Sdn. Bhd. has recently shut down its Klang factory which used to make pillows, although all the inventories of raw materials and machinery are still there awaiting disposal. A former customer, En. Kassim, just asked whether he could be supplied with one last delivery of 500 pillows. You ascertain the following facts:

1. There is sufficient covering material in the inventory. This originally cost RM600 but has a disposal value of RM 190.

2. There is sufficient stuffing material in the inventory. This originally cost RM 450. It was to have been shipped to the Shah Alam factory at a cost of RM80. The Shah Alam factory would currently expect to pay RM500 for this quantity.

3. Labour cost would be RM450.

4. A supervisor could be spared from the Shah Alam for the week needed to produce the pillows. His normal salary for a month is RM1,600 and his taxi fare and hotel bill in Klang would amount to RM135.

5. Two visits would need to be made by the site inspector to approve the completed work. He is an independent contractor who is not employed by Sejahtera Sdn. Bhd., and charges En. Kassim directly for the work. His cost is RM 150 for each visit made.

6. Sejahtera Sdn. Bhd.s system trainer would need to spend one day at the company for delivering training. He is paid a monthly salary of RM 2,000 but also receives commission of RM 125 for each day spent delivering training at a clients site.

7. Before the factory was closed, fixed overheads were absorbed at 200% of direct labour cost.

8. 25 machine hours will be required. The machine to be used is already leased for a weekly leasing cost of RM600. The machine has sufficient available capacity for the order to be completed. The variable running cost of the machine is RM7 per hour.

Required:

(a) Prepare a cost statement, using relevant costing principles, and calculate the minimum cost that Sejahtera Sdn. Bhd. should charge for the order. Make detailed notes showing how each cost has been arrived at and explain why each of the costs above has been included or excluded from your cost statement. (13 marks)

(b) Berjaya Sdn. Bhd. manufactures and sells a range of products. It is not dominant in the market in which it operates and, as a result, it has to accept the market price for each of its products. The company is keen to ensure that it continues to compete and earn satisfactory profit at each stage throughout a products life cycle. New management accounting techniques are often described as contributing to cost reduction. Evaluate how the following techniques able to reduce cost and illustrate your answer with at least one example from any industry:

(i) Benchmarking (6 marks)