QUESTION ONE

1. 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:

		Product Q	Product R
	Budgeted production (units)	80,000	120,000
	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:

1. State and explain THREE (3) objectives of budgeting. (6 marks)
2. Calculate the budgeted machine set up cost per unit of product Q and R. (5 marks)
3. State THREE (3) benefits and TWO (2) limitations of using an activity based budgeting system. (5 marks)