Page 6 - CIMA MCS Workbook February 2019 - Day 2 Suggested Solutions

CIMA FEBRUARY 2019 – MANAGEMENT CASE STUDY

In this way, there should be a less arbitrary allocation of overhead costs to the services provided
by the practices. With more accurate costs, better information about profitability would be
provided to the business.

The difficulties of implementation of ABC would be similar to those of standard costing, as
essentially it is still an application of standards, although done on a different basis.

Even an activity such as taking a phone call to book a routine check‐up will take different lengths
of time depending on the patient involved.

As ABC focuses on overheads, separate standard costing exercises would still need to be done for
any direct costs such as the materials used.

There would also still be an element of arbitrary allocation of costs. For instance, the depreciation
of capital assets such as furniture in reception isn’t tied directly to particular activities undertaken.

Financial Manager

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