Case title: FTG Ltd
Requirements:
Read the case study and answer the following question. You need to show all your workings in table format whenever applicable. Identify clearly the question number that your answer is related to. Marks will be deducted for poorly set out or unclear presentation. Please print on one side of the paper only and use a font size of 12 and insert page numbers. Please use Word tables and not Excel worksheets.
1. Analyse the activity-based system designed by Anne Abbott:
(a) What are its strengths and weaknesses?
(b) What changes would you make to it and why?
2. Would you recommend that FTG Ltd implement the activity-based cost system (after making any modifications you recommended in your answer to question 1)? Justify your recommendation. marks)
Case study — FTG Ltd
The new C300 is currently budgeted to sell through the mass merchandiser chains for about $150 retail. I think this price is too high. We will only sell about 50,000 units a year at that price. I think we should drop our selling price from $90 to $80, and allow the merchandisers to drop their retail price to just under $135. At that price we should sell at least 40% more units, and since the variable cost is about $50, our overall profits will be higher.
JIM BRUSH, SALES MANAGER
I’m not sure we really know what our products cost. I would like to really make certain that we are making a profit at $80 before I agree to drop our price, because we will not be able to change prices again in the near future.
JACK BRUSH, PRESIDENT
Introduction
The FTG Ltd a Victorian manufacturer of fireproof home and office safes, was founded in 1931 to produce insulated metal office safes. Over the years, additional metal products, including containers, files, and smaller safes, were introduced. Many of these products were aimed at the consumer as opposed to the office market. In 1994, a completely new class of products manufactured out of plastic was introduced. Due to their ease…