Required
You are Sunny Power and you are to write a research report to Ms. Eva Green to assist her in understanding Sola Systems costing systems, problems and alternatives as outlined below.
a) Using the current costing system, calculate the product cost of each panel.
b) Using the current costing system, prepare a classified profit statement by product.
c) Using the current costing system, prepare a classified profit statement by region.
d) Why does Panel A have higher gross and net profit rates than panel B? Make sure to use the case study and your profit statements to support your discussion.
e) Using Activity Based Costing, calculate the product cost of each panel.
f) Using Activity Based Costing, prepare a classified profit statement by product.
g) Using Activity Based Costing, prepare a classified profit statement by region.
h) Using the case study and your profit statements, explain to Ms. Eva Green giving three specific reasons (examples) why the ABC system results in more accurate costing of the products and better information for decision making. Do not repeat any part of your answer for d) above.
i) Giving two specific reasons (examples), discuss what "wrong" decisions could be made by the management as a consequence of its current costing system? Make sure to use the case study and your profit statements to support your discussion.
j) Using the case study, discuss some limitations of Sunny Power's proposed system and give one specific example of how it can be improved.
k) What recommendations would you make to Eva Green. These recommendations should follow logically from your discussion in previous answers above.