march 2025 quality tyre co

Sorry for the long post ahead.
March 2025 past paper
Quality Tyre Co is based in Cassland and manufactures and sells two types of tyre for motor vehicles: the Basic and the Sport. It sells these tyres to commercial customers such as garages and car repair shops. The company has been using activity-based costing throughout 20XO and is keen to take this one step further and begin using activity-based budgeting as well.

Details of some of last year’s cost driver rates for overheads were as follows:

$
Cost per material order 80
Cost per store requisition 14
Cost per machine set-up 120
Cost per quality control inspection 260
Cost per sales order 46
Cost per customer delivery 210
With the exception of customer delivery costs, all of these costs are expected to increase by inflation of 5% in the year ending 31 December 20X1. Customer delivery costs, however, are a semi-variable cost and the variable element relates to fuel, which is expected to increase by 10%, whilst the fixed cost element is expected to increase by 5%. Information for two different levels of activity for the total number of tyres is shown below:

Number of customer deliveries 1,300 800
Total delivery costs $301,000 $266,000
The average order size for customers is 40 tyres and Quality Tyre Co arranges a specific delivery for each customer order.

Annual sales forecasts for the year ending 31 December 20X1 are as follows:

Basic Sport
Sales (tyres) 60,000 45,000
Opening inventory levels of tyres (finished goods) on 1 January 20X1 are as follows:

Basic Sport
Opening inventory 3,600 2,400
Quality Tyre Co’s inventory policy for 20X2 is to hold enough inventory of tyres to meet the next month’s sales demand. The forecast annual sales for 20X1 are expected to be the same in 20X2 and will occur evenly over the yeah

Batch sizes are 200 for Basic and 450 for Sport and quality control checks take place on every 50th tyre. Every time a batch is complete, the machine used for manufacturing them needs to be set up again for the next batch.

In 20XO the number of material orders and store requisitions was as follows:

Basic Sport
Number of material orders 1,800 1,460
Number of store requisitions 6,400 4,240
Quality Tyre Co introduced a new material ordering system several weeks ago, and whilst the exact effect of this is not known yet, the company estimates that there is a 50% probability that it will reduce the number of orders by 30% and a 50% probability that it will reduce them by 20%. Store requisition numbers are not expected to change.

Requirement

(a) Using the template provided, complete the activity-based budget for overheads for Quality Tyre Co for the year ended 31 December 20×1.
(14 marks)

My query: how do we calculate the material order costs?
in the answer solution they have considered it to be a fixed cost and applied probabilities.
but since our production level is different compared to 20×0 (last year), shouldn’t our material order costs be different from last years?
production this year:
basic : 60000+(60000/12)-3600= 61400 units
sports: 45000+(45000/12)-2400 = 46,350 units
for january of next year (20×2) we calculated using this years budgeted sales volume. 5000 per month this year for each month and so 5000 for next years January. Now, with the same assumption that what we produce for next years January is equivalent to our current years demand for each month we can calculate the volume for 20×0. it could be basic: 3600*13 = 46800 (13 for 13 months including 20x1s january. )sports: 2400*13 = 31200.
but they have taken the material order costs the same as last year and calculated expected values. my problem is with the assumption that number of material orders do not vary with production levels when they should.
Even if my last years production values are wrong, the production level is still greater this year since for next years January we are producing 5000 units (for basic) instead 3600 units.