Discuss the issues that may arise in using the current absorption costing system based on labour hours. Discuss the appropriateness of changing to an activity-based costing (ABC) system for product costing and pricing for the business.

Business Report Of Greengrass Ltd, a private UK company

Description

Produce a business report in good style, that reports on the following issues:-

a) 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 in terms of margin of safety. Ensure that you justify any calculation assumptions that you make and comment on the results obtained. (Note, that there are several ways that you can calculate break even and you can use a number of these on the case above.)

b) Discuss the issues that may arise in using the current absorption costing system based on labour hours. 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 prices that the company adopts in relation to the prices charged by its competitors. Suggest if the price should be adjusted in the light of current market conditions.

d) Discuss some of the alternative measures of performance that could be incorporated in the financial performance measures that the business uses at the moment.

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 copies into the word document before submitting through Turnitin.

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