Discuss CIMA CIMAPRO19-P01-1 Exam Topic 3 Question 106

Company NBO is providing a quote to manufacture 500 passenger seats for a bus company.

Relevant cost is being used as the basis for the quote.

Which THREE of the following should be included as relevant costs or savings in the production of the 500 passenger seats?

AEquipment depreciation of $2,000 for the time the passenger seats are in production.

BElectricity charges of $1,500 for the completion of the order.

CAdministration overheads of $3,200 apportioned on the basis of labour hours in production.

DSeat cover material, to be bought for $6,000, which cannot be used on other products.

EIdle time pay of $1,000 which would be paid to workers if the quote is not accepted

F$750 paid for a consultant's advice on quoting for the order.

Suggested Answer: C

References:

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34 comments · newest first

Cristal 11 months ago

Admin overheads shouldn't be included, they’re fixed costs.

Valene 11 months ago

Totally agree, idle time pay is relevant if the quote isn't accepted!

Kelvin 11 months ago

Wait, why is equipment depreciation relevant? Seems off.

Melvin 12 months ago

I think the electricity charges should count too.

Xochitl 12 months ago

Definitely includes the seat cover material, it's specific to this order.

Mariann 12 months ago

The seat cover material seems relevant since it can't be used elsewhere, but I'm a bit confused about the idle time pay. Would that be included?

Precious 1 year ago

I practiced a similar question where we had to exclude overheads, so I think administration overheads should not be included here either.

Jimmie 1 year ago

I'm not sure about the equipment depreciation; I thought it was a sunk cost and shouldn't be included in relevant costs.

Lorenza 1 year ago

I remember we discussed that only costs directly related to the production should be included, so I think electricity charges might be relevant.

Patrick 1 year ago

The consultant's advice fee seems like a relevant cost since it's specifically for this order. I'll make sure to include that one.

Dortha 1 year ago

I'm not sure about the administration overheads and the idle time pay. Those seem more like indirect costs, but I'll have to double-check the definitions.

Cheryll 1 year ago

I'm pretty confident that the equipment depreciation, electricity charges, and seat cover material are all relevant costs that should be included.

Jeannetta 1 year ago

Okay, let's think this through step-by-step. We need to identify the costs that are directly related to the production of the 500 passenger seats.

Marta 1 year ago

This question seems straightforward, but I want to make sure I understand the concept of relevant costs before selecting the answers.

Dana 1 year ago

Hmm, let's see. Equipment depreciation, electricity charges, admin overheads... Sounds like a real electrifying, bureaucratic production line we've got here! I'd definitely include the consultant's fee - gotta make sure those seats are 'chair-ismatic' enough to win the contract.

Rupert 1 year ago

Wait, are we supposed to be answering this for an exam? Yikes, I should've paid more attention in class. Guess I'll just pick the ones that sound the most 'relevant' and hope for the best!

Clay 1 year ago

↳ replying to Rupert

E) Idle time pay of $1,000 which would be paid to workers if the quote is not accepted

Vashti 1 year ago

↳ replying to Rupert

D) Seat cover material, to be bought for $6,000, which cannot be used on other products.

Lynelle 1 year ago

↳ replying to Rupert

A) Equipment depreciation of $2,000 for the time the passenger seats are in production.

Noemi 1 year ago

I'm gonna have to disagree with my peers. E is a must-include - you can't just ignore the idle time pay if the quote isn't accepted. That's a real cost that needs to be factored in.

Chanel 1 year ago

I would go with B, C, and D. The electricity charges and administration overheads are still costs associated with the order, even if they're not directly for the production. And the seat cover material is a no-brainer.

Jess 1 year ago

↳ replying to Chanel

I'm not sure about E and F, they seem more like potential costs if the order is not accepted.

Dahlia 1 year ago

↳ replying to Chanel

I think A should be included too, equipment depreciation is important for the production.

Barabara 1 year ago

↳ replying to Chanel

I agree, B, C, and D should definitely be included as relevant costs.

Nobuko 2 years ago

A, D, and F seem like the most relevant costs to include in the quote. The equipment depreciation, seat cover material, and consultant's advice all directly impact the production costs.

Franklyn 1 year ago

↳ replying to Nobuko

Electricity charges should be included as a relevant cost since it is directly related to completing the order.

Georgeanna 1 year ago

↳ replying to Nobuko

Idle time pay should not be included as a relevant cost since it is only applicable if the quote is not accepted.

Ettie 1 year ago

↳ replying to Nobuko

I think administration overheads should also be included since it is directly related to the production of the passenger seats.

Leota 1 year ago

↳ replying to Nobuko

I agree, including equipment depreciation, seat cover material, and consultant's advice in the quote makes sense.

Marla 1 year ago

↳ replying to Nobuko

Including those costs in the quote would give a more accurate picture of the total production expenses.

Marla 1 year ago

↳ replying to Nobuko

I agree, those costs are directly related to the production of the passenger seats.

Arletta 2 years ago

I'm not sure about E. Wouldn't idle time pay only be relevant if the quote is not accepted?

Justine 2 years ago

I agree with Sylvie. A for equipment depreciation, D for seat cover material, and E for idle time pay make sense.

Sylvie 2 years ago

I think A, D, and E should be included as relevant costs.

CIMAPRO19-P01-1 Exam - Topic 3 Question 106 Discussion