less than 24 H

Required:

Required:

Question 3: Managing Supplier Relationships (16 marks)

Required:

=== END OF QUESTIONS ===

Question 1.1

The company is thinking using the total life cycle costing to price the product. Explain to the company how

the company can be benefited using the total life cycle costing approach to product costing over the

traditional product costing system . (Maximum 150 words) (4 marks)

Your Answer:

Question 1.2

Consider the company uses the life cycle costing. Which alternatives would you recommend to the

company? Show calculations to support your answer. (7 marks)

Your Answer:

Question 1.3

What other factors should Incepta consider in choosing its costing and pricing strategy. Justify your

suggestions. (Maximum 150 words) (4 marks)

Your Answer:

Question 2: Managing Costs (Target Costing) (14 marks)

Megastore limited, a wholesaler, has three primary activities of its operation: procuring, warehousing, and

Selling. The company reports the following operating data for the year 2019:

Activity Cost Driver Quantity of

Cost Driver

Cost per Unit of

Cost Driver

Procuring Number of purchase orders 1,150 $165 per order

Warehousing Number of moves 8,400 $34 per move

Selling Number of shipments 650 $95 per shipment

In 2019, Megastore buys 101,500 units at an average cost of $14 per unit and sells them at an average $24

per unit. The fixed operating costs for the year is $251,500.

The company’s customers are demanding for 14% discount in the coming year ; however, company’s

suppliers are only willing to pay 7% discount. It is anticipated that the company can sell the same amount if

the price reduction demand is met.

The company estimates that the number of purchase orders can be reduced to 830 and the shipping costs

can be decreased by $18 per shipment. The reengineering the Warehousing processes must have brought

further cost reduction.

Question 2.1

Prepare a schedule showing the maximum target costs for Warehousing, assuming that the company wants

to maintain the same amount of profit next year. (10 marks)

Your Answer:

Question 2.2

‘Value engineering is the key to achieve target costs’. Explain the statement with suitable examples.

(Maximum 150 words) (4 marks)

Your Answer:

Question 3.1

The looming supply disruption from coronavirus offers historical opportunities for companies to build or

destroy customer goodwill’ (Byrnes & Wass, 2020) . Discuss the statement. Your response should cover how

an organization can manage suppliers and maintain customer loyalty even after this pandemic crisis.

(Maximum 250 words) (8 marks)

Your Answer:

Question 3.2

‘By improving supplier relations, the organization can reduce the bargaining power of their supplier’. Do

you agree? Critically evaluate the statement.

(Maximum 250 words) (8 marks)

Your Answer:

Question 4: Managing Customer Relationships (15 marks)

Denair Company Limited manufactures refrigerating components. The company has gathered

the following information about two of its customers: Breeze Easy and Fresh Cool.

Breeze Easy Fresh Cool

Sales revenue $226,000 $165,000

Cost of goods sold 100,500 62,500

General selling costs 35,500 27,000

General administrative costs 23,200 17,250

Cost-driver data used by the firm and traceable to Breeze Easy and Fresh Cool are:

Customer Activity Cost Driver Pool Rate

Sales activity Sales visits $955

Order taking Sales orders 272

Special handling Units handled 41

Special shipping Shipments 490

Customer Activity Breeze Easy Fresh Cool

Sales activity 9 visits 6 visits

Order taking 28 orders 33 orders

Special handling 490 units 440 units

Special shipping 30 shipments 41 shipments

Question 4.1

Perform a customer profitability analysis for Denair. Compute the gross margin and operating income on

transactions related to Breeze Easy and Fresh Cool. (7 marks)

Your Answer:

Question 4.2

Comment on the relative profitability of two customers and what, if anything, Denair should do. Explain.

(Maximum 150 words) (4 marks)

Question 4.3

‘Loyal customers are not necessarily desirable customers. The common practice of trying to retain

customers by discounting or providing a loyalty program may no longer be an affordable way to do

business’. Discuss the statements with suitable examples.

(Maximum 150 words) (4 marks)