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Wonderland Corporation (Wonderland), which produces gas stoves, has an opportunity to buy the handles for its stoves for US$12.00 per unit. This purchase would affect

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Wonderland Corporation ("Wonderland"), which produces gas stoves, has an opportunity to buy the handles for its stoves for US$12.00 per unit. This purchase would affect prices, volume, and costs as follows: Buy Make Unit selling price US$ 360 US$ 360 Volume (per month) 600 600 Unit variable cost USS 95 USS 105 Purchase parts (per unit) US$ 12 US$ 0 Fixed cost US$ 3,200 US$ 7,300 REQUIRED (a) Wonderland's management would decide whether the part should be made or bought. Calculate and explain the decision. (8 marks) (b) Due to the intense competitors' pressure, Wonderland's management would conduct the value chain analysis to offer additional value-added service to the customers. Suggest THREE ways how the value chain may influence long-run pricing decisions of gas stoves. (9 marks) (c) During the value chain analysis, Wonderland used activity-based costing to understand the cost of activities to analyze customer profitability. (i) Identify FOUR major activities that affect customer costs. (8 marks) (ii) Explain how the activities are associated with their relevant cost drivers in Wonderland. (8 marks)

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