问题详情

SectionA暂缺
SectionB–ALLFIVEquestionsarecompulsoryandMUSTbeattempted
TheChemicalFreeCleanCo(CCo)providesarangeofenvironmentally-friendlycleaningservicestobusinesscustomers,oftenprovidingaspecificservicetomeetaclient’sneeds.Itscustomersrangefromlargeofficesandfactoriestospecialistcarewardsathospitals,wherespecialistcleaningequipmentmustbeusedandregulationsadheredto.CCooffersbothregularcleaningcontractsandcontractsforone-offjobs.Forexample,itslatestclientwasachainofrestaurantswhichemployedthemtoprovideanextensivecleanofalltheirbusinesspremisesafteranoutbreakoffoodpoisoning.
Thecleaningmarketisverycompetitive,althoughthereareonlyasmallnumberofcompaniesprovidingachemicalfreeservice.CCohasalwaysusedcost-pluspricingtodeterminethepriceswhichitchargestoitscustomersbutrecently,thecostofthecleaningproductsCCouseshasincreased.ThishasmeantthatCCohashadtoincreaseitsprices,resultinginthelossofseveralregularcustomerstocompetingserviceproviders.
ThefinancedirectoratCCohasheardabouttargetcostingandisconsideringwhetheritcouldbeusefulatCCo.
Required:
(a)Brieflydescribethemainstepsinvolvedinderivingatargetcost.(3marks)
(b)ExplainanydifficultieswhichmaybeencounteredandanybenefitswhichmayarisewhenimplementingtargetcostingatCCo.(7marks)


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