Explain the possible issues in using absorption costing to determine the prices of the scooters and discuss the appropriateness of changing to an activity based costing (ABC) system for product costing and pricing for the business.

Additional Information

Use a report format and make sure that you answer all parts of the assignment clearly in the report Set up a subheading / section of the report to answer each question. Simple calculations can be shown in the report but more complex workings and calculations should be shown as appendices to the report. Any Excel spreadsheets should be cioopies into the word document before submitting through Turnitin.

• Your attention is drawn to the University policy on cheating and plagiarism. Penalties will be applied where a student is found guilty of academic misconduct, including termination of programme Policy Link
• You are required to keep to the word limit set for an assessment and to note that you may be subject to penalty if you exceed that limit. (Policy Link)  You are required to provide an accurate word count on the cover sheet for each piece of work you submit.
• For late or non-submission of work by the published deadline or an approved extended deadline, a mark of 0NS will be recorded. Where a re-assessment opportunity exists, a student will normally be permitted only one attempt to be re-assessed for a capped mark.
• An extension to the published deadline may be granted to an individual student if they meet the eligibility criteria of the Exceptional Circumstances Policy.

Required:

Produce a business report to Simon Travis, in good style, that covers the following issues:-

a)Provide calculations on the expected level of sales that you believe need to be made to break even. Back this up with further calculations that show risk. Ensure that you justify any calculation assumptions that you make. Comment on the results obtained. (Note, that there are several ways that you can calculate break even and you can use as many of these as you feel is appropriate.)

b)Explain the possible issues in using absorption costing to determine the prices of the scooters and discuss the appropriateness of changing to an activity based costing (ABC) system for product costing and pricing for the business.

c)Provide recommendations as to the adequacy of the current pricing strategy that the company adopts and suggest if the price should be adjusted in the light of current market conditions.

d)Evaluate the potential financial and other issues that may arise in relation to the alternative options that may be undertaken to increase capacity.

Professional, sophisticated/ innovative communication, with exceptional clarity and/or audience-engagement, and exemplary academic conventions. Professional communication, that holds the attention of its reader/audience throughout, and demonstrates academic conventions that are accurate and relevant to the level of study/ beyond.

Fluent and coherent communication, which demonstrates consistent and accurate academic conventions.

Mostly fluent and coherent communication; demonstration of appropriate academic conventions, which may include some errors or inconsistencies.

Communication that is difficult to follow at times because of poor clarity/structure; inconsistent demonstration of academic conventions.

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