Assignment Question
Businesses should ensure they price their goods and services reasonably to retain competitive advantage. An accurate method of costing is important as it can assist a business to determine a fair price for their final product.
With the above in mind, the CEO of GoGo Airlines has provided you with the following information:
Total Overheads = £200,000
Total Machine Hours = 100,000
| Product: | Vegan Meal: | Non-vegan Meal: |
|
Units of Production |
300,000
|
450,000 |
|
Material Cost per meal |
£10 |
£12 |
|
Labour Cost per meal |
£8 |
£10 |
|
Machine Hours per meal |
1/30 | 1/5 |
| % Overheads | |
|
Set-up Costs |
20 |
|
Inspections |
60 |
|
Delivery costs |
20 |
| Vegan Meal: | Non-vegan Meal: | Total: | |
|
Set ups |
100 |
500 | 600 |
|
Inspections |
500 |
200 | 700 |
|
No. of Deliveries |
400 |
800 | 1200 |
You are required to calculate the unit costs of the vegan and non-vegan meals using:
- Traditional costing using machine hours as the basis of allocation of costs and
- ABC system
In addition, you are also required to:
- Discuss the importance of accurate costing in supporting the financial decision process
- Compare the traditional costing system to the ABC system and
- Recommend, with reasons, which of the two costing systems is most appropriate for the airline sector
This is an essay-style question with a word count range of 1500 – 2000 words.
The learning outcomes for this assignment are:
- Apply established management accounting techniques to a variety of decision-making problems
- Utilise a variety of management accounting techniques to interpret and evaluate a variety of business situations