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help with this question please

Forums › Ask CIMA Tutor Forums › Ask CIMA BA2 Tutor Forums › help with this question please

  • This topic has 1 reply, 2 voices, and was last updated 8 months ago by Cath.
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  • August 4, 2021 at 4:01 pm #630389
    odislaine
    • Topics: 1
    • Replies: 0
    • ☆

    Bybel Co manufactures three products, XX, YY and ZZ. The products are
    sold into a competitive market, and customers are relatively price
    sensitive as the price of each product can significantly affect their buying
    behaviours. At the same time, Bybel is under pressure to reduce costs
    and improve profitability because competitive rivalry in the industry has
    limited profits and lead to competitive moves, including price cutting
    and a burden of spending on product improvements and innovation.
    Each product uses the same materials, but in different quantities, and
    the same type of direct labour.
    For many years, the company has been using full absorption costing and
    absorbing overheads on the basis of direct labour hours. Selling prices
    are then determined using cost-plus pricing. This is common within this
    industry, with most competitors applying a standard mark-up.
    Budgeted production and sales volumes for XX, YY and ZZ for the next
    year are 3,500 units, 4,800 units and 780 units respectively.
    The budgeted direct costs of the three products are shown below;
    XX YY ZZ
    Direct Materials 250.00 260.00 198.00
    Direct Labour @ £22 per
    hour 330.00 330.00 330.00
    In the next year, Bybel Co also expects to incur indirect production costs
    and these are analyzed as follows;
    Activities; £
    Perform Quality Inspections 5,656,500 Number of Quality Inspections
    Implement Product Design
    Changes 2,514,000 Number of Design Change Requests
    Operate Machinery 1,508,400 Number of Machine Hours
    Plant Management and Security 2,891,100 Number of Units Produced
    Question 2 continues on the next page.
    5R6Z0041_2021_R Page 7/11
    Question 2 continued.
    The following additional data relates to each product;
    Product Product Product
    XX YY ZZ
    Batch size (units) 50 80 40
    Number of Quality Inspections per Batch 1 4 1
    Number of Design Changes in total 20.0 27.5 4.5
    Machine hours per unit 15.0 12.5 14.0
    The finance director has suggested using activity-based tools instead of
    full absorption costing, since this will dramatically improve the
    profitability of the organization.
    Required;
    (a) Calculate the budgeted full production cost per unit of each
    product using Bybel Co’s current method of absorption costing. All
    workings should be to two decimal places. (3 marks)
    (b) Calculate the budgeted full production cost per unit of each
    product using activity-based costing. All workings should be to two
    decimal places. (13 marks)
    (c) Using the numbers that you have calculated in parts (a) and (b),
    evaluate the change in the full production cost per unit of each
    product caused by a move to activity based costing compared to
    using absorption costing. Within your response you should seek to
    explain in detail why the changes to each of the full production
    costs per unit have occurred. (9 marks)
    Total 25 marks

    October 26, 2021 at 4:44 pm #639154
    Cath
    Moderator
    • Topics: 0
    • Replies: 420
    • ☆☆☆

    Hi there – no need to worry – this isn’t a CIMA question for BA2 ( they are approx 1.5 minutes long each -so youd never receive a 25 mark essay request

    Hope thats ok
    Cath

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