SECTION A Application Questions (40 marks)

Price of sugar will increase by 90cents VAT exclusive per kilogram from today.

The new prices of sugar:

1kg	$2.30FJ $1.04US
2kg	$4.60 $2.08US
4kg	$9.20 $4.15US
25kg		$57.50 $25.96US

According to the Fijian Competition and Consumer Commission the new prices are a result of extensive public consultations and exhaustive reviews of FSCs financials.

A statement from FCCC said the new prices were determined after a thorough review of the submission made by the Fiji Sugar Corporation (FSC) on 12 June 2021.

(Source: Fiji Times, 2022)

Question 1

Over the years, Fiji Sugar Corporation claims that its Cost of Production has increased remarkably. Comment on at-least 5 cost drivers at FSC. Explain how these cost drivers drive the cost with practical example. (10 marks)

Question 2

List and Explain 5 aspects of management accounting that can be used to control costs in Sugar Manufacturing. Practically relate your arguments to the sugar industry. (10 marks)

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.

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?

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.

SECTION B RESEARCH QUESTION (10 marks)

Activity Based Costing (ABC) is said to be more accurate than the traditional costing methods because the Activity-Based Costing (ABS) method identifies the activities in the company and assigns their costs to production based on actual consumption. However, ABC has its own problems as well.

RESOURCES

ACTIVITIES

COST OBJECTS

Based on the model above and your knowledge on ABC, research on:

At least 4 benefits of ABC to an organization. (4 marks)

List and explain at-least 3 limitations of the ABC model. (3 marks)

List and explain at-least 3 problems associated with ABC model. (3 marks)