Case study: R&V Fashion

Required:

Write a report written from the point of view of the management accountant directed to the general manager in which you answer the following questions:

1. Why is R&V Fashion's existing pricing system inadequate for its current operating environment?

2. Develop an activity-based cost system for R&V fashion based on year 2016 data. Calculate the activity cost driver rate for each R&V Fashion activity in 2016. The activities are as follows:
Ship cartons; process cartons (we define two different activities, process cartons and ship cartons because they handle different quantities of the activity driver, as 75 000 cartons are shipped via freight and 5 000 cartons are shipped via drop-ship delivery); drop-ship delivery; set-up manual order; enter items ordered (individual order lines in an order); validate EDI order.

3. Using your answers to question 2, calculate the profitability of Customer A and Customer B.

4. What explains any difference in profitability between the two customers?

5. Explain:
a. What are the limitation, if any, to the estimates of the profitability of the two customers?
b. What are the advantages and the limitations of Activity-based costing?

Attachment:- Case.rar