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CIMAPRO19-P01-1 Exam - Topic 4 Question 97 Discussion

A company sells and services photocopying machines. Its sales department sells the machines and consumables, including ink and paper, and its service department provides an after sales service to its customers. The after sales service includes planned maintenance of the machine and repairs in the event of a machine breakdown. Service department customers are charged an amount per copy that differs depending on the size of the machine.The company's existing costing system uses a single overhead rate, based on total sales revenue from copy charges, to charge the cost of the Service Department's support activities to each size of machine. The Service Manager has suggested that the copy charge should more accurately reflect the costs involved. The company's accountant has decided to implement an activity-based costing system and has obtained the following information about the support activities of the service department:Calculate the annual profit per machine for each of the three sizes of machine using activity-based costing.
E) Profit Per Machine using ABC: Small $166, Medium $1241, Large $746
A) Profit Per Machine using ABC: Small $1076, Medium $1041, Large $1946
B) Profit Per Machine using ABC: Small $186, Medium $1441, Large $2046
C) Profit Per Machine using ABC: Small $196, Medium $1191, Large $1046
D) Profit Per Machine using ABC: Small $376, Medium $2341, Large $986
F) Profit Per Machine using ABC: Small $176, Medium $1341, Large $946 References:

CIMAPRO19-P01-1 Exam - Topic 4 Question 97 Discussion

Actual exam question for CIMA's CIMAPRO19-P01-1 exam
Question #: 97
Topic #: 4
[All CIMAPRO19-P01-1 Questions]

A company sells and services photocopying machines. Its sales department sells the machines and consumables, including ink and paper, and its service department provides an after sales service to its customers. The after sales service includes planned maintenance of the machine and repairs in the event of a machine breakdown. Service department customers are charged an amount per copy that differs depending on the size of the machine.

The company's existing costing system uses a single overhead rate, based on total sales revenue from copy charges, to charge the cost of the Service Department's support activities to each size of machine. The Service Manager has suggested that the copy charge should more accurately reflect the costs involved. The company's accountant has decided to implement an activity-based costing system and has obtained the following information about the support activities of the service department:

Calculate the annual profit per machine for each of the three sizes of machine using activity-based costing.

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Suggested Answer: E

by Sharee at Sep 16, 2024, 05:23 PM

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Coral
10 months ago
I’m not convinced ABC is the best approach here.
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Carmela
10 months ago
Surprised the large machine has such a high profit margin!
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Shenika
10 months ago
Totally agree, ABC makes sense for accurate costing!
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Brandon
10 months ago
I think those numbers seem way too high for the small machine.
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Belen
10 months ago
Profit for Small is $1076, Medium $1041, Large $1946.
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Carrol
11 months ago
I think option A looks familiar, but I’m worried I might have mixed up the overhead rates for the different activities.
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Lauran
11 months ago
I feel like the profit figures should vary significantly between the sizes, but I can't recall the exact numbers we calculated in class.
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Joaquin
11 months ago
I think the key is to allocate the costs based on the activities related to each machine size. I hope I got the calculations right!
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Adelina
11 months ago
I remember we practiced a similar question on activity-based costing, but I’m not sure how to apply it here with the different machine sizes.
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Quentin
11 months ago
I'm a little unsure about how to weigh the different cost drivers and their relative importance. I'll need to think through the logic carefully to make sure I'm not missing anything in my approach.
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Bea
11 months ago
Okay, I think I've got a handle on this. The key is to use the activity-based costing information to accurately allocate the service department costs to each machine size. I'll focus on that and I'm confident I can get the right answer.
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Bettye
11 months ago
Hmm, I'm a bit confused by the different cost drivers and how they impact the profitability of each machine size. I'll need to work through the calculations step-by-step to make sure I get this right.
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Alysa
11 months ago
This looks like a tricky activity-based costing problem. I'll need to carefully read through the information provided and make sure I understand the different cost drivers and how to allocate the service department costs to each machine size.
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Chara
11 months ago
This seems straightforward enough. I just need to plug the numbers into the right formulas and do the math. As long as I'm careful with the calculations, I should be able to nail this question.
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Mayra
2 years ago
I'm trying to wrap my head around this, but all these numbers are making my brain hurt. Can't they just give us a simple multiple-choice question, like 'What's the meaning of life?'
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Hester
2 years ago
Definitely, a simple question would be a nice change.
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Ahmed
2 years ago
It would be nice to have a break from all the calculations.
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Tommy
2 years ago
I agree, I wish they would simplify things for us.
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Tamesha
2 years ago
I know, all these numbers can be overwhelming.
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Herman
2 years ago
Hmm, I'm not so sure about that. The numbers in Option B seem a bit high, especially for the large machines. Maybe Option C or F would be a better fit?
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Timothy
2 years ago
I see your point. Option C or F would definitely be better options than Option B for calculating the profit per machine.
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Quentin
2 years ago
Yeah, Option C or F would definitely be a better fit. The profit per machine for the large size in Option B does seem too high.
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Evangelina
2 years ago
I think Option C is the most accurate choice here. The profit per machine for the large size in Option B does seem inflated.
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Lavera
2 years ago
I agree, Option B does seem a bit high. Option F could also be a good choice, with more balanced numbers for all sizes.
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Keneth
2 years ago
I agree, Option F also seems more balanced compared to Option B. The numbers in Option C also look reasonable.
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Therese
2 years ago
I think Option C might be more accurate. The profit per machine for the large size seems more reasonable.
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Lawanda
2 years ago
Option C does seem more reasonable, the profit per machine for the large size in Option B does seem too high.
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Mona
2 years ago
I'm not sure about that. What if the new system ends up showing lower profits per machine?
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Jannette
2 years ago
The activity-based costing approach seems like a more accurate way to determine the profit per machine. Option B looks like the right answer to me.
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Jesus
2 years ago
User 2
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Lindsey
2 years ago
User 1
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Ranee
2 years ago
I agree with you, Theron. It will help in accurately reflecting the costs involved.
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Theron
2 years ago
I think the company should implement the activity-based costing system.
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