CIMA Exam CIMAPRO19-P01-1 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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Lilli

2 months 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

6 days ago

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

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Willard

20 days ago

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

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Yolando

26 days ago

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

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Kirk

2 months 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

16 days 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 months ago

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

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Lashaun

2 months ago

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

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Cassie

2 months 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

2 hours ago

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

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Truman

1 days ago

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

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Man

2 days 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

3 days ago

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

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Carma

6 days ago

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

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Rochell

1 months ago

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

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Floyd

1 months ago

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

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Shannan

2 months ago

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

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Selma

2 months 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

2 months 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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