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

Actual exam question for CIMA's CIMAPRO19-P01-1 exam

Question #: 97
Topic #: 4

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.

AProfit Per Machine using ABC: Small $1076, Medium $1041, Large $1946

BProfit Per Machine using ABC: Small $186, Medium $1441, Large $2046

CProfit Per Machine using ABC: Small $196, Medium $1191, Large $1046

DProfit Per Machine using ABC: Small $376, Medium $2341, Large $986

EProfit Per Machine using ABC: Small $166, Medium $1241, Large $746

FProfit Per Machine using ABC: Small $176, Medium $1341, Large $946
References:

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Suggested Answer: E

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

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Coral

4 months ago

I’m not convinced ABC is the best approach here.

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Carmela

4 months ago

Surprised the large machine has such a high profit margin!

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Shenika

4 months ago

Totally agree, ABC makes sense for accurate costing!

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Brandon

4 months ago

I think those numbers seem way too high for the small machine.

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Belen

4 months ago

Profit for Small is $1076, Medium $1041, Large $1946.

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Carrol

5 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

5 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

5 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

5 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

5 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

5 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

5 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

5 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

5 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

1 year 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

1 year ago

Definitely, a simple question would be a nice change.

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Ahmed

1 year ago

It would be nice to have a break from all the calculations.

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Tommy

1 year ago

I agree, I wish they would simplify things for us.

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Tamesha

1 year ago

I know, all these numbers can be overwhelming.

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Herman

1 year 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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