Issues in Managemet Accounting

Introduction

Solar powered cars are the new revolution set to change the world. The car harnesses solar energy which is abundant in the atmosphere and converts it to electrical energy that is used to power the car. Solar powered cars are mostly used by race car drivers. The cars they drive are mostly too expensive. The aim of our study is to be able to transfer the benefits of the solar powered race car to a saloon car that will be cost friendly to the consumer and also to the manufacturer.

In a bid to reduce the cost to our solar powered car, the car will have two seats: one for the driver and the other one for a passenger; and only two doors. The car will be valued using a target costing approach.

MARKET PRICE

Currently the market price of a small solar car is approximately $16,575 to $18,000. We intend to have the price of the solar car at the lowest market price which is $16,575.

TARGET PROFIT

Our target profit is 20% on each car produced, thus a breakdown of the target profit and target cost from the market price can be shown as;

| |$ |

|Target selling price |16,575 |

|Target profit @ 20% |3,315 |

|Target cost from market price |13,260 |

STANDARD COSTS

| | | | |

|Item |Quantity |Cost per unit |Total |...