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CA Intermediate · Cost and Management Accounting · Unit & Batch Costing

A firm makes Product Z in batches of 500 units. Per batch: material Rs 60,000, labour Rs 25,000, and set-up cost Rs 5,000. Factory overheads are absorbed at 80% of labour cost. Selling price is fixed at a profit of 20% on cost of production per unit (no other costs). What is the selling price per unit?

Batch cost is 60,000 plus 25,000 plus 5,000 plus overhead of 20,000, totalling 110,000, or Rs 220 per unit. Adding 20% profit on cost gives Rs 264 per unit, which is not among the listed options.

  1. ARs 216Correct
  2. BRs 240
  3. CRs 192
  4. DRs 228

Explanation

Overhead = 80% x 25,000 = 20,000. Batch cost = 60,000 + 25,000 + 5,000 + 20,000 = 110,000. Per unit = 220? 110,000/500 = 220. Profit 20% on cost gives 264. Re-checking options: none equals 264, so the intended computation is flawed.

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