QUESTION O NE QR uses an activity based budgeting (ABB) system to budget product cost. It manufactures
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QUESTION ONE
- QR uses an activity based budgeting (ABB) system to budget product cost. It manufactures two products, product Q and product R. The budget details for these two products for the forthcoming period are as follows:
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| Product Q | Product R |
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| Budgeted production (units) | 80,000 | 120,000 |
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| Number of machine setups per batch | 4 | 3 |
|
| Batch size (Units) | 5,000 | 4,000 |
The total budget cost of setting up the machine is GH74,400
Required:
- State and explain THREE (3) objectives of budgeting. (6 marks)
- Calculate the budgeted machine set up cost per unit of product Q and R. (5 marks)
- State THREE (3) benefits and TWO (2) limitations of using an activity based budgeting system. (5 marks)
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