QUESTION: 9

A master budget comprises which of the following?

The budgeted income statement and the budgeted cash flow statement only.
The budgeted income statement and the budgeted statement of financial position only.
The budgeted income statement and budgeted capital expenditure only.
The budgeted income statement, the budgeted statement of financial position and the budgeted cash flow statement only.

Answer(s): D

A company makes and sells three products A, B and C.

The selling prices and costs of the three products, using a traditional absoprtion costing system, are shown in the table below.

The company has undertaken an analysis of overhead costs using activity-based costing (ABC).

The revised overhead costs for products A, B and C are $6, $32 and $55 respectively.

When comparing the figures obtained under the two costing methods, which of the following statements are true?

Select ALL that apply.

Product B makes a profit under both methods, but the profit is lower using ABC.
The product that is the most profitable under traditional absorption costing makes a loss under the ABC methodology.
Product C is currently overpriced based on cost plus pricing and the selling price should be reduced.
Activity-based costing results in a lower level of overhead costs for the company.
Product A shows a profit under ABC but had appeared loss making under traditional absorption costing.

Answer(s): A,B,E

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