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.