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Hi sir hope you are doing well
I have confusion about two questions1 .. target costing is type of
A … Feed back control
B. Feedforward control
C … Double loop control
2 .. current ratio 1.6:1
30% is inventory
Half inventory sold for 100% markup
How do we calculate new current ratioWhy are you attempting questions for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers – it has answers and explanations.
Target costing is an example of feedforward control, for the reasons I explain in my free lectures.
For your second question, I assume that the question says that the inventory is 30% of the current assets.
For this sort of question you need to invent figures and see what happens. Use any figures you want (the answer will be the same).So, suppose the current liabilities are 100. Then the current assets are 160 (of which 48 is the inventory).
If they sell half of the inventory at a mark-up of 100% then the inventory will fall by 24 and the cash or receivables will increase by 48. So the new current assets will be 160 – 24 + 48 = 184. The current liabilities will remain at 100.
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