Question

1.Describe, in your own words, how the cost of a product or product is determined
service in a company.
2. Explain, in your own words, how the selling price of a
product or service.
3. Mention and explain the differences that exist between a master budget and a
flexible budget

Answer 1

1. The cost of a product is arrived in the form of summation of material cost, labour cost and manufacturing overhead cost. Every cost which are part of making a product available to package form part of product cost

2.The selling price of a product is determined by the law of supply and demand. Consumers have a desire to acquire a product, and producers manufacture a supply to meet this demand. The equilibrium market price of a good is the price at which quantity supplied equals quantity demanded.Graphically, the supply and demand curves intersect at the equilibrium price

3.The key difference between master budget and flexible budget is that master budget is a financial forecast that contains all budgeted revenues and costs for the upcoming accounting year whereas flexible budget is a budget that is adjusted by incorporating the changes in the number of units produced. Both these budgets are considered important milestones in the budgetary control process. They are equipped with a number of uses such as cost control and performance measurement.