Question

1. You work as a costing manager at a metal stamping factory.
Describe the process a manager must go about when choosing which of three kinds of stamping job to attempt when you have a single stamping machine with a limited capacity.
[8 marks]
2. Explain the primary reason a company would adopt target costing.
[8 marks]

Answer 1

ANSWERS:

1.Limit of the stamping machine is the restricting element or the asset requirement in the given circumstance. As costing director, my objective is boost working salary for my manufacturing plant.

The accompanying advances ought to be taken to choose with respect to which stamping work/occupations to take up:

• Deduct variable expenses from pitching cost for each activity to touch base at the commitment edge per work.
• Register the quantity of machine hours required for each activity.
• Partition the commitment edge processed in stage a. by the quantity of the separate machine hours to touch base at the commitment edge per machine hour.
• Rank the occupations as indicated by the commitment edge per machine hour.
• The activity with the most noteworthy commitment edge per machine hour ought to be organized over the others.
• On the off chance that there is as yet save limit, at that point the activity positioned no. 2 ought to be taken up.

2. Primary reason a company would adopt target costing:

Diminishing expenses is the essential an organization would embrace target costing. Target costing computes the greatest cost passable for an item in light of the market cost of the item. Targets costing helps in evaluating the esteem (showcase) of item that gets from the item.By deducting the satisfactory overall revenue from that market value, the objective cost at which the item ought to be produced is resolved.

It helps in rousing the workers to accomplish the objective benefit. This approach is basically utilized by the organization which goes into showcase with new items.