Assignment Requirements
Please answer the attached
A computer manufacturer produces three types of devices:mobile phones, tablets, and computers. For the production of these three devices you have the following information:
| Phone | Tablet | Computer | ||
| Material cost per unit | £90 | £140 | £315 | |
| Direct labor hours per unit | 2 | 2.5 | 4 | |
| Budgeted units | 1,500,000 | 900,000 | 1,200,000 | |
| Labor cost per hour | £8 | |||
| Overhead costs per annum | ||||
| Utilities | £20,000,000 | |||
| Rent | £15,000,000 | |||
| Audit and legal | £5,000,000 | |||
| Administrative staff | £40,000,000 | |||
| Total | £80,000,000 | |||
ABC analysis suggested that overhead costs are distributed to the three products according to the table below:
| Overheads | Phone | Tablet | Computer |
| Utilities | £8,000,000 | £5,000,000 | £7,000,000 |
| Rent | £8,250,000 | £2,250,000 | £4,500,000 |
| Audit and legal | £2,900,000 | £1,250,000 | £850,000 |
| Administrative staff | £23,200,000 | £6,000,000 | £10,800,000 |
For each of the three products, the company aims at a different percentage for profit. Under the full absorption costing method and the targeted profit percentage, the prices of the three products should be:
| Phone | Tablet | Computer | |
| Full costing price | £170.69 | £233.87 | £435.67 |
- Calculate the aimed profit percentages for the three products and under the full absorption costing method, with overhead costs absorbed on the basis of direct labour hours.
- Use the profit percentages that you derived in (1) and calculate the prices of the three products under the ABC system.
- Recommend a cost system and include any changes that you would suggest to the pricing strategy of the computer company (target length 300 words).
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