The case looks at a situation where a local textile manufacturing company finds its existing costing system inadequate and tries to move towards an activity-based costing approach. Even though the newer system is a refinement, it still has its flaws, and the CFO has to decide whether a more accurate system is needed for costing various customer orders.

You will need to calculate the cost of the customer orders given in Exhibit 6 of the case using the existing costing system and also the proposed costing system in order to formulate an appropriate recommendation for the company.

The current costing system cost per meter is not accurate nor efficient and replacing that with cost per minute. The current costing system does not take into account the different processing times for different products. This means that the cost of some products is overestimated, while the cost of others is underestimated

Q: How would you use the data in Exhibit 8 to modify the proposed costing system?

Case study- Sapphire Textile Mills Limited: Refined Costing. Additional info if needed:

Exhibit 8: Average Departental Efficiency Per Customer Order \begin{tabular}{|c|c|c|c|c|} \hline Customer Name & Cutting (\%) & Stitching (\%) & Inspection (\%) & Packing (\%) \\ \hline AS & 49 & 62 & 60 & 53 \\ \hline CD & 45 & 66 & 34 & 54 \\ \hline Cl & 73 & 72 & 57 & 67 \\ \hline \end{tabular} Exhibit 4: Typical Monthly Overhead Costs Source: Company Data. (the numbers have been disguised) Exhibit 5: Manufacturing Expenses Per Department Source: Company Data. (the numbers have been disguised) Exhibit 6: Sample Customer Order Data of Varying Manufacturing Complexity Fxhihit 7* Manufacturino Tima Par Cuctomar Ordar