CMA Foundation · Fundamentals of Financial and Cost Accounting · Cost, Cost Centre, Cost Unit and Cost Drivers
A power utility in Gujarat has these figures for the month: kilowatt-hours generated 5,00,000, of which 4,00,000 are sold and the rest are lost in transmission. Total cost of generation and transmission is ₹20,00,000. What is the cost per kWh sold?
The cost per kWh sold is ₹5. The total cost of ₹20,00,000 is spread over the 4,00,000 units actually sold, since transmission losses are absorbed by the saleable units. Using 5,00,000 units generated would give ₹4, which understates the cost.
- A₹4.00
- B₹5.00Correct
- C₹3.20
- D₹6.25
Explanation
Cost per unit sold uses only the units sold: 20,00,000 ÷ 4,00,000 = ₹5. Dividing by the 5,00,000 units generated gives ₹4, which ignores the transmission loss being absorbed by the units sold.
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