Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

SECTION C CASE STUDY Aclivity-based costing: traditional costing manufacturer Total marks for this question: 20 marks (Suggested time: 35 minutes] Lakim Koto Py Lid manufactures

image text in transcribed
SECTION C CASE STUDY Aclivity-based costing: traditional costing manufacturer Total marks for this question: 20 marks (Suggested time: 35 minutes] Lakim Koto Py Lid manufactures a wide range of delicious cakes and pastries. At the annual Christmas party, the company's owner, LM, Koto treated his employees to a nostalgic review of the firm's history, he fold them Twenty years ago, we had only three product lines - ples, finger buns and famingtons. We were flat out producing large volumes of each product using very simple machinery and a lot of hard work. Myf How Times have changed! We still make and sel a lot of pies and famingfont but we also produce a wide range of low volume ines, such as Danish parties, doughnuts and vonilo sices I hear you sighing, and no wonder these low volume products are o poin in the neck. They are complex to produce and their short production runs involve a lot of extra machinery setups and material handling. Bu the occountants for me that these specially lines have wonderful profit margins so we must not complain Kato thon outined the dramatic changes that had occurred within the business over the past 20 years. In the factory he had seen the introduction of computer-controlled moing machines and ovens that replaced a lot of the direct labour operations, and on increased emphasis on quality and delivery performances. Indeed, right across the business, more ond more effort hod been placed to keep customer hoppy. However, his speech cast a gloomy shadow across the Christmas festivities when he womed. Despite all this progress, the company seems to be struggling. Our profits are declining, and if things don't improve over the next few months. This may be our last Christmas together. To survive, we must of work very hard. We must forecast on increasing sales particularly of our high morgin speciality products The company's management accountant, toni Tonne, hod become concemed about the conventional product costing system Craving for Cakes. The manufacturing people were also sure that the casting system was distorting product costs REQUIRED: 1. Describe the changes in cost structure that are likely to have occurred of Craving for Cokes over the last 20 years and explain their couses & marks 2. Do you thing that the existing costing system understates or overstates the cost of a Lomingtons b. Danish pastries Explain your answer. 5 marks Activity based costing has the potential to improve the accuracy of product costs. However, it is important for management to understand its imitations Asht Tonne identity and sufficiently opioin the tv imitations morka

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Payroll Accounting 2021

Authors: Bernard J. Bieg, Judith A. Toland

31st Edition

0357358287, 9780357358283

More Books

Students also viewed these Accounting questions

Question

Why is persistence important? (p. 211)

Answered: 1 week ago