IM2.3 Intermediate: Analysis of costs by behaviour for decision-making. The Nort
ID: 2605186 • Letter: I
Question
IM2.3 Intermediate: Analysis of costs by behaviour for decision-making. The Northshire Hospital Trust operates two types of specialist X-ray scanning machine, XR1 and XR50. Details for the next period are estimated as follows: Machine XR1 XR50 Running hours 1100 2000 Variable running costs excluding plates) 27500 64000 Fixed costs 20000 97500 A brain scan is normally carried out on machine type XR1: this task uses special X-ray plates costing £40 each and takes four hours of machine time. Because of the nature of the process, around 10 per cent of the scans produce blurred and therefore useless results Required: (a) Calculate the cost of a satisfactory brain scan on machine type XR1. (7 marks) (b) Brain scans can also be done on machine type XR50 and would take only 1.8 hours per scan with a reduced reject rate of 6 per cent. However, the cost of the X ray plates would be £55 per scan. Required: Advise which type should be used, assuming sufficient capacity is available on both types of machine 8 marks) CIMA Stage 1 Cost AccountingExplanation / Answer
Assumption: Sufficient capacity is available for both:
a) The total number of scans that can be done on XR1:
Total hours/ Hours consumed per scan i.e: 1100/4= 275 Scans
Since the wastage is after the scans are done so the plates consumed will not be reduced by 10%.
Total cost of Plates shall be: 275*40= 11,000
Variable running costs shall be 27,500
Fiexed Costs shall be = 20,000
Therefore total cost shall be : 58,500
Total reports generated shall be 275 less 10% on account of wastage. Therefore the reports generated correctly would be 247.50.
Hence the cost per report shall be = 58,500/247.50
Ans; 236.37
b) The total number of scans that can be done on XR50:
Total hours/ Hours consumed per scan i.e: 2000/1.8= 1,111.11 Scans
Since the wastage is after the scans are done so the plates consumed will not be reduced by 6%.
Total cost of Plates shall be: 1,111.11*55= 61,111.05
Variable running costs shall be 64,000
Fiexed Costs shall be = 97,500
Therefore total cost shall be : 222,611.05
Total reports generated shall be 1,111.11 less 6% on account of wastage. Therefore the reports generated correctly would be 1,044.44.
Hence the cost per report shall be = 222,611.05/1044.44
Ans; 213.139
Advise: Type XR50 shall be used as it is cheaper cost wise.