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CIMAPRO19-P01-1 Exam - Topic 7 Question 78 Discussion

A major company sells a range of electrical, clothing and homeware products through a chain of department stores. The main administration functions are provided from the company's head office. Each department store has its own warehouse which receives goods that are delivered from a central distribution center.The company currently measures profitability by product group for each store using an absorption costing system. All overhead costs are charged to product groups based on sales revenue. Overhead costs account for approximately one-third of total costs and the directors are concerned about the arbitrary nature of the current method used to charge these costs to product groups.A consultant has been appointed to analyses the activities that are undertaken in the department stores and to establish an activity based costing system.The consultant has identified the following data for the latest period for each of the product groups for the X Town store:Calculate the total profit for each of the product groups:.... using the current absorption costing system;
D) The profit or loss in $ was.... Clothing 192; Electrical (56); Homeware 148
A) The profit or loss in $ was.... Clothing 122; Electrical 56; Homeware (178)
B) The profit or loss in $ was.... Clothing (175); Electrical 86; Homeware 22
C) The profit or loss in $ was.... Clothing 85; Electrical 36; Homeware (28)

CIMAPRO19-P01-1 Exam - Topic 7 Question 78 Discussion

Actual exam question for CIMA's CIMAPRO19-P01-1 exam
Question #: 78
Topic #: 7
[All CIMAPRO19-P01-1 Questions]

A major company sells a range of electrical, clothing and homeware products through a chain of department stores. The main administration functions are provided from the company's head office. Each department store has its own warehouse which receives goods that are delivered from a central distribution center.

The company currently measures profitability by product group for each store using an absorption costing system. All overhead costs are charged to product groups based on sales revenue. Overhead costs account for approximately one-third of total costs and the directors are concerned about the arbitrary nature of the current method used to charge these costs to product groups.

A consultant has been appointed to analyses the activities that are undertaken in the department stores and to establish an activity based costing system.

The consultant has identified the following data for the latest period for each of the product groups for the X Town store:

Calculate the total profit for each of the product groups:

.... using the current absorption costing system;

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Suggested Answer: D

by Kasandra at Dec 10, 2023, 02:27 PM

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Madalyn
9 months ago
Electrical profits seem low across the board, huh?
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Art
10 months ago
Not sure about those numbers, they seem off to me.
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Elise
10 months ago
Wait, how can Homeware be negative in some options?
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Pauline
10 months ago
I think option A makes the most sense.
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Carissa
10 months ago
Looks like Clothing is doing well in all options!
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Lacey
10 months ago
I recall that clothing usually has higher margins, but I can't remember the exact numbers we calculated last time. I hope I can figure it out!
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Shawana
11 months ago
I’m a bit confused about how to apply the overhead costs here. I think I might have mixed up the profit figures during my revision.
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Vicky
11 months ago
This question feels familiar; I think we did a similar one in class where we had to break down costs. I hope I can remember the formulas!
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Leonor
11 months ago
I remember we practiced calculating profits using absorption costing, but I’m not sure if I got the overhead allocation right for each product group.
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Janey
11 months ago
Ugh, I'm not sure I fully grasp how to properly allocate overhead costs using absorption costing. Maybe I should review my notes before diving into the calculations.
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Felice
11 months ago
This seems like a good opportunity to apply the concepts we've been learning about costing systems. I'm feeling pretty confident I can work through this and get the right answers.
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Hildegarde
11 months ago
Okay, let me think this through step-by-step. First I'll need to calculate the total revenue and total costs for each product group, then subtract the costs from the revenue to get the profit. Gotta be careful with that overhead allocation though.
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Emelda
11 months ago
Hmm, I'm a bit confused by the different costing methods mentioned here. I'll need to make sure I understand the differences between absorption costing and activity-based costing before I can tackle this properly.
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Rex
11 months ago
This question looks pretty straightforward. I'll start by calculating the total profit for each product group using the current absorption costing system, then compare that to the activity-based costing approach.
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Pauline
11 months ago
I think I know the general concept of order orchestration, but the wording of this question is a bit tricky. I'll need to read it a few times to make sure I'm interpreting it properly.
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Susy
11 months ago
I've seen similar questions before about email privacy. I feel like option B is misleading because it suggests email isn't personal enough.
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Merrilee
11 months ago
Hmm, I'm not entirely sure about this one. I'll need to carefully review the network diagram and the options to make sure I understand the requirements before selecting the answer.
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