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Question 1 (43 marks) CC Co. manufactures two furniture products, Product X and Product Y. The activity and cost information are extracted as follow: Notes:
Question 1 (43 marks) CC Co. manufactures two furniture products, Product X and Product Y. The activity and cost information are extracted as follow: Notes: Cost pool (a) are set-up cost incurred each time a batch of particular product is produced. Cost pool (b) are inspection costs incurred for each component of each unit of product produced. Cost pool (c) are storage costs incurred to store particular products during production process. Cost pool (d) are support costs incurred for security guard services, building insurance, general maintenance service, etc. Required: (i) Classify the cost pools (a) to (d) to the Four activity cost centers. (4 marks) (ii) Assume a traditional costing system is used with overhead costs absorbed based on machine hours, what is the total amount of overhead costs assigned to Product X and Product Y respectively? (10 marks) (iii) Assume an activity-based costing system is used, what is the total amount of overhead costs assigned to Product X and Product Y respectively? ( 18 marks) (iv) The management of CCCo. adopted the overhead costs got from traditional costing system to price Product X and Product Y. Elaborate the problem that may be faced by CCCo. ( 2 marks) (v) The management of CC Co. would like to adopt strategies to meet the target cost, which is 20% below the actual cost, with reference to Ikea's value chain model. Elaborate how Ikea achieve the following three aspects: ( 9 marks) 1) Eliminate non-value-added activities 2) Improve product design 3) Improve production/operation process
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