Question 3

The following table shows the wholesale sugar prices of some of the sugar producing nations:

Country	Sugar Price per KG (USD)
Brazil	0.30
India	0.35
Pakistan	0.31
Philippines	0.50

i. List and explain at-least 5 reasons as to why the above countries can afford to sell sugar at lower prices than Fiji but still make profits.

(5 marks)

ii. As a management Accountant, explain how Fiji Sugar Corporation can use Budgetary Control System to Control its Cost of Production. How can these budgetary initiatives give Fiji some competitive edges in-terms of world market prices?

(5 marks)

iii. The 4 Questions below are based on Target Costing in relation to the FSC case. Treat each part separately as a completely different question.

Part A (2.5 marks)

The selling price of Sugar has been set at $450 per tonne and at that price the FSC expects to sell 1000 tonnes per week.

The required profit margin is 20% of sales and the expected production cost is $400 per tonne.

Required:

Calculate the target cost gap.

Part B (2.5 marks)

The selling price of sugar has now been revised to $300 per unit and at this new price FSC expects to sell 1000 tonne of sugar per week.

FSC management board has set a required return of 20% on its investment of $1250000.

Required:

Calculate the target cost per tonne of sugar.

Part C (2.5 Marks)

The following hypothetical information is available for Sugar production at the Fiji Sugar Corporation.

Target Selling Price $20 per tonne of Sugar

Target Profit Margin 30%

Estimated Production Cost $16 per unit

Calculate the target cost gap for Sugar Production in this scenario.

Part D (2.5 marks)

The selling price of a tonne of Sugar is $600. At this price, the FSC plans to sell 5000 tonnes in week.

The FSC board wants to have a mark-up of 20% on cost. The expected production cost is $520 per tonne of sugar.

Calculate the target cost gap.