MATH 2156B The Chemical Free Clean Co (C Co) provides

The Chemical Free Clean Co (C Co) provides a range of environmentally-friendly cleaning services to businesscustomers, often providing a specific service to meet a client’s needs. Its customers range from large offices andfactories to specialist care wards at hospitals, where specialist cleaning equipment must be used and regulationsadhered to. C Co offers both regular cleaning contracts and contracts for one-off jobs. For example, its latest clientwas a chain of restaurants which employed them to provide an extensive clean of all their business premises after anoutbreak of food poisoning.The cleaning market is very competitive, although there are only a small number of companies providing a chemicalfree service. C Co has always used cost-plus pricing to determine the prices which it charges to its customers butrecently, the cost of the cleaning products C Co uses has increased. This has meant that C Co has had to increase itsprices, resulting in the loss of several regular customers to competing service providers.The finance director at C Co has heard about target costing and is considering whether it could be useful at C Co.Required:(a) Briefly describe the main steps involved in deriving a target cost.(3 marks)(b) Explain any difficulties which may be encountered and any benefits which may arise when implementingtarget costing at C Co.(7 marks)(10 marks)

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