Page 4 - CIMA OCS Workbook May 2019 - Day 1 Tasks

CIMA MAY 2019 – OPERATIONAL CASE STUDY

EXERCISE 1(B) - STANDARD COSTING AND VARIANCES

Variance Reason

Sales volume variances Directors need to be able to see which products are performing well
and which are not, so they can identify reasons and take action, such
as dropping prices or increasing marketing spend

Sales mix variances for This will help directors assess the strength of the VitaMine brand in
own brand v customer- the market place
branded goods

Materials mix variances To identify whether standard mixes for products are being adhered to.

Materials yield To identify whether product reject rates are higher than inspected
variances

Labour efficiency To identify labour problems (we are told that these may occur due to
variances the high growth)

EXERCISE 1(C) - QUALITY COSTING

Type of cost How it could apply to VitaMine

Prevention Costs • Quality training for production and inspection staff to ensure all
items are produced to the required standard.
• Regular maintenance of production machinery

Appraisal Costs • We are told VitaMine checks samples at the mixing stage, runs
test batches on the encapsulating machine and checks capsules
visually (both when encapsulating and after polishing)

Internal Failure Costs • Presumably products that fail checks are disposed of?

External Failure Costs • VitaMine has a very good reputation for quality with customers.
We are not told the details of any guarantees or warrantees and
the costs involved should problems arise.

44 KAPLAN PUBLISHING