Skip to content

CA Intermediate · Cost and Management Accounting · Activity Based Costing

Bharat Gears Ltd makes two products, X and Y. Overheads are Rs 4,80,000 in total: Machine setups Rs 2,00,000 (driver: number of setups), Machining Rs 1,60,000 (driver: machine hours) and Packing Rs 1,20,000 (driver: number of packing orders). Data: X: 20 setups, 3,000 machine hours, 100 orders; Y: 30 setups, 5,000 machine hours, 200 orders. Under ABC, what is the total overhead assigned to Product X?

Product X is assigned Rs 1,80,000. Setups cost Rs 4,000 each giving Rs 80,000, machining at Rs 20 per hour gives Rs 60,000, and packing at Rs 400 per order gives Rs 40,000. These add to Rs 1,80,000, and Y receives the remaining Rs 3,00,000.

  1. ARs 1,80,000Correct
  2. BRs 1,60,000
  3. CRs 2,00,000
  4. DRs 2,20,000

Explanation

Setup rate = 2,00,000/50 = Rs 4,000, so X = 80,000. Machining rate = 1,60,000/8,000 = Rs 20, so X = 60,000. Packing rate = 1,20,000/300 = Rs 400, so X = 40,000. Total = 80,000 + 60,000 + 40,000 = Rs 1,80,000. Check: Y = 1,20,000+1,00,000+80,000 = 3,00,000; sum = 4,80,000.

Did you get it right without looking?

One question tells you little. A timed set on Activity Based Costing shows your real accuracy, how long you take and where you lose marks.

Practise Activity Based CostingFree diagnostic mock

More Activity Based Costing questions