Choi Fung Hag Case Solution

Register to read the introduction… The price would like to control within the reasonable level, it should be properly allocate the cost of each products. Activity Based Costing may help to measure the ‘real’ cost of product and the further price making which is more nearly to the reasonable price. Second, there are wider ranges of products. Choi Fung Hong was developing and produces a lot of types of product and those products may classify to different product lines such as H2O Hydrating product. It may helpful on the comparing the real cost of different product line, or each product item after allocate the overhead such as transportation of material and warehouse rental to the total products cost. The profitability also is measured form the Activity Based Techniques. Third, the non-profit making departments which were related to the products are too much. The non-profit making activity include the transportation of raw material, or the finishing of the finished goods. Thus, there are high levels of non-production costs and production costs were the lower percentage of the total costs in products. For example, Choi Fung Hong focuses on quality of their products. Therefore, they may conduct the comprehensive survey to ensure the quality of the products before it launch to …show more content…
That is, activity cost pool/ Activity driver. The sample calculation of repair and maintenance cost as follow: Assume the repair and maintenance cost for this quarter is $15,000 and the total machine hour of the quarter is 14,000 hours. Therefore, the cost was used around $1.07 per machine hour ($15,000/ 14,000hours). On the other hand, the machine hour of two products - X and Y which are intend to have a comparison by the management of company, was 0.2 and 0.6 hours. It can be allocate the $0.21 and $0.64 of repair and maintenance cost to product X and Y respectively. After allocate all the cost by this method, that is, ABC costing, the real cost was fairly representation to the