Transcribed Image Text
In: AccountingQUESTION THREETreble Plc is planning to commence production of a new product –the Dom....QUESTION THREETreble Plc is planning to commence production of a new product –the Dom. It is expected that demand for the Dom will last for 6years and that they will sell 1,000 units in the first year; 3,000units in the second year and 6,000 units per year thereafter. Theselling price will be ZMW15 per unit and the company wishes toachieve a mark-up of 50% on cost.The following costs have been estimated:Design and development ZMW 40,000Variable production Cost: ZMW 7 per unitAdditional fixed production cost ZMW 4000 per yearEnd of life cost ZMW 10,000RequiredCalculate the target cost per unit for the production of Doms. Calculate the actual full production cost per unit for thefirst year and comment as to whether or not there is a costgap. Calculate the lifecycle cost per unit and comment as to whetheror not there is a costgap. State and explain three measures a company could take to closea cost gap. Explain how target costing can be beneficial to modern daybusinessmanagers.