CIMAPRO19-P01-1 Exam - Topic 5 Question 65 Discussion

Actual exam question for CIMA's CIMAPRO19-P01-1 exam

Question #: 65
Topic #: 5

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.

AProduct B makes a profit under both methods, but the profit is lower using ABC.

BThe product that is the most profitable under traditional absorption costing makes a loss under the ABC methodology.

CProduct C is currently overpriced based on cost plus pricing and the selling price should be reduced.

DActivity-based costing results in a lower level of overhead costs for the company.

EProduct A shows a profit under ABC but had appeared loss making under traditional absorption costing.

Show Suggested Answer

Suggested Answer: A, D, E

References:

by Laticia at Feb 05, 2023, 03:44 AM

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Mari

7 months ago

Product B's profit is lower with ABC, that's a fact!

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Lacey

7 months ago

I disagree, ABC doesn’t always mean lower overhead costs.

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Olen

7 months ago

Wait, how can A be profitable under ABC but not under absorption?

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Melita

7 months ago

I think Product C is overpriced, totally agree with that.

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Amber

8 months ago

Product B definitely makes a profit under both methods.

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Yuonne

8 months ago

I don’t recall if ABC always results in lower overhead costs for the company. It seems like it could vary depending on the product mix.

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Graciela

8 months ago

I'm a bit confused about product C being overpriced. I thought cost-plus pricing was supposed to cover costs, but maybe ABC shows a different picture?

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Mammie

8 months ago

I remember a similar question where the most profitable product under absorption costing ended up showing a loss with ABC. I think that might apply here too.

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Tess

8 months ago

I think product B does make a profit under both methods, but I'm not entirely sure if the profit is actually lower with ABC. I need to double-check the numbers.

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Susy

8 months ago

Okay, I've got this. The key is to remember that federal law generally supersedes state law, unless the state law is more stringent. I'll go with option C.

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Billye

8 months ago

I'm not entirely sure about this one. The CDATA section is throwing me off a bit. I'll need to review my notes and examples to make sure I'm approaching this the right way.

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Becky

8 months ago

Custom Scaling sounds like the best option here. Adjusting the text size directly should make the most difference in reducing eye strain during long reading sessions.

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Lilli

1 year ago

Looks like the company is really going to need to re-evaluate their pricing strategies after this ABC analysis. Maybe they should hire a team of accountants who can actually do math.

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Nicolette

12 months ago

Product C is currently overpriced based on cost plus pricing and the selling price should be reduced.

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Willard

1 year ago

Product A shows a profit under ABC but had appeared loss making under traditional absorption costing.

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Yolando

1 year ago

Product B makes a profit under both methods, but the profit is lower using ABC.

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Kirk

1 year ago

Wait, so are we supposed to find the most profitable product or the one that's the least unprofitable? I feel like I need a crystal ball for this one.

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Shawnda

12 months ago

The product that is the most profitable under traditional absorption costing makes a loss under the ABC methodology.

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Dortha

1 year ago

Product A shows a profit under ABC but had appeared loss making under traditional absorption costing.

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Lashaun

1 year ago

Product B makes a profit under both methods, but the profit is lower using ABC.

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Cassie

1 year ago

Aha, so the company was overpricing Product C all this time. They should probably give their pricing team a raise for catching that.

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Alton

11 months ago

Definitely, it's important for companies to regularly review their costing methods to ensure accurate pricing.

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Truman

11 months ago

It's interesting how the profit margins can change based on the costing method used.

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Man

11 months ago

Yes, the pricing team did a good job catching that. Product A shows a profit under ABC but had appeared loss making under traditional absorption costing.

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Anthony

11 months ago

Product C is currently overpriced based on cost plus pricing and the selling price should be reduced.

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Carma

12 months ago

It's interesting how the costing method can change the perceived profitability of a product.

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Rochell

1 year ago

Product A shows a profit under ABC but had appeared loss making under traditional absorption costing.

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Floyd

1 year ago

Yes, the company should definitely adjust the selling price of Product C to reflect the actual costs.

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Shannan

1 year ago

Product C is currently overpriced based on cost plus pricing and the selling price should be reduced.

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Selma

1 year ago

Oh, this is tricky. I can already see that the traditional absorption costing was hiding some important cost information. Time to dive into the details!

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Dong

1 year ago

Hmm, looks like we need to do some careful analysis here. The revised overhead costs from ABC seem to have a significant impact on the profitability of these products.

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