ADVANCE COST ACCOUNTING - SESSION 10

NAME : AFRAH AZZAHIRA WISMONO

STUDENT ID : 008202000053
CLASS : M ACC 2020 CLASS 3

Exercise 1 : Terms
Explain and illustrate the following terms :
1. Competitive Advantage
Providing customers with higher value at the same or lower cost than competitors, or
providing customers with higher value at a cheaper cost than competitors

Example : The team; Unique access to technology or production methods; A product that no-one else

2. Cost Leadership Strategy

Is to focus on providing the same or better value at a price that is less expensive than that of competitors.

Example : Redbox rents DVDs and video games through vending machines for only $1; Papa Murphy

3. Differentiation Strategy
Meanwhile, aims to boost customer value by expanding the benefits that customers obtain (customer realiza

Example : Coca-cola, Starbucks

4. Focusing Strategy
Is focusing on or choosing a certain market or consumer group to compete in. One option is to choose the cl
to cater to these specific target groups. Another option is to choose specialized target markets where the com
has competitively superior core competencies.

Example : Amazon.com, Pepsi Black

5. Strategic Positioning
Is the method of choosing the best combination of these three broad strategic approaches.

Example : Computer company that focus on providing cutting edge technology at premium costs befo

Exercise 2 : Calculation
See the example : "Internal Linkage Analysis : An Example" p383

Calculate if : Material usage is $5 per part used; no fixed activity cost, then assembling parts are $15 per direct
no fixed activity cost.

Internal Linkage Analysis Example

DATA Current Expected
Activity Activity
Activities Activity Activity
Driver
Number of Capacity
Material Usage 200,000 Demand
200,000 Demand
80,000
parts
Direct labour
Assembling Parts 10,000 10,000 5,000
hours
Numbers of
Purchasing Parts Number of 15,000 12,500 6,500
orders
Warranty Repair defective 1,000 800 500
products
Additional data
Material Usage : $5 per part used; no fixed activity cost
Assembly : $15 per direct labor hour; no fixed activity cost
Purchasing : Three salaried clerks, each earning a $30,000 annual salary;
annual salary; each clerk is capable of processing 5,000 purchase orders annually.
Variable activity costs $0.50 per purchase order processed for forms, postage, etc.
Warranty : Two repair agents, each paid a salary of $28,000 per year;
Each repair agent is capable of repairing 500 units per year.
Variable activity costs $20 per product repaired

Cost Reduction from Exploiting Internal Linkage

Material Usage 600,000
(200,000 - 80,000)*$5
Labor Usage 75,000
(10,000 - 5,000)*$15
Purchasing 3,000
[$30,000 + $0.50(12,500 - 6,500)]
Warranty Repair 34,000
[$28,000 + $20(800-500)]
Total 712,000
Units 10,000
Unit savings 71.2

Exercise 3 : Calculation
See exhibit 11-8, do the calculation if:

- Reworking products $300,000

- Expediting products 60,000

I. Activity Costs Component

Process
Activity Failure/Late
Failure
Delivery
Reworking Products 300,000 40,000
Expediting Products 60,000 10,000

II. Supplier Data

Fielding Electronics Oro Limited
XIZ YIZ XIZ YIZ
Unit Purchase Price 10 26 12 28
Unit Purchased 40,000 20,000 5,000 5,000
Failed Units 800 190 5 5
Late Shipments 30 20 0 0

Reworking Rate = $300,000/1,000*

= $300 per failed component
*(800 + 190 + 5 + 5)

Expediting rate = $60,000/50*

= $1,200 per late delivery
*(30 + 20)

Supplier Costing
Fielding Electronics Oro Limited
XIZ YIZ XIZ YIZ
Purchase cost :
$10 x 40,000 400,000
$26 x 20,000 520,000
$12 x 5,000 60,000
$18 x 5,000 90,000
Reworking products :
$300 x 800 240,000
$300 x 190 57,000
$300 x 5 1,500
$300 x 5 1,500
Expediting products :
$1,200 x 30 36,000
$1,200 x 20 24,000
Total Cost 676,000 601,000 61,500 91,500
Units 40,000 20,000 5,000 5,000
Total Unit Cost $16.90 $30.05 $12.30 $18.30
ods; A product that no-one else can offer (protected by IP law or patents); Brand and reputation

sive than that of competitors.

chines for only $1; Papa Murphy's sells pizzas that customers cook at home.

omers obtain (customer realization)

. One option is to choose the clients and markets that seem appealing, then build the capability
ed target markets where the company

c approaches.

chnology at premium costs before their competitors; Nike

mbling parts are $15 per direct labor hour;

rchase orders annually.
for forms, postage, etc.
28,000
500
20