Page 5 - CIMA OCS Workbook February 2019 - Day 1 Suggested Solutions

SUGGESTED SOLUTIONS

Suggest some cost drivers that One approach is to look at each stage of the production
could be used by Trigg process (p8):
Adventure for ABC. • Store department costs – number of issues
• Cutting and drilling department – various options here
including number of set ups, number of cuts, number of
drill holes
• Finishing department – labour hours
• Packing department – number of boxes
• Quality control 0- note that we are not told about quality
control procedures but, assuming they do some, a
suitable cost driver would be number of inspections.

EXERCISE 1(B) - STANDARD COSTING AND VARIANCES

Variance Reason

Sales price variances • These will enable Trigg to identify whether market pressures are
forcing prices down.

For towers and arms do • As well as wanting to see whether overall sales of frames, say,
sales mix and quantity have increased, it is also useful to see if customers are buying
variances more basic items compared to their deluxe counterparts.

Wood price variance • Timber is the biggest element of the cost per unit, so it is vital that
Trigg doesn’t pay too much.

Wood usage variance • Timber is the biggest element of the cost per unit, so it is vital that
it isn’t wasted, say by inefficient set ups or cutting.

Labour efficiency • There was spare capacity in 2018 (p24) but the plan is to increase
variances production in 2019. Labour efficiency is thus critical to avoid
excessive overtime.

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