Skip to content

CA Intermediate · Cost and Management Accounting · Introduction to Cost and Management Accounting

Bharat Plastics produces 8,000 units in a month. Total cost at this level is Rs 6,40,000, of which Rs 2,40,000 is fixed. Assuming the fixed cost stays the same in total and variable cost per unit is constant, what is the total cost per unit at an output of 10,000 units?

Rs 74 per unit. Variable cost is Rs 50 per unit (Rs 4,00,000 over 8,000 units). At 10,000 units, total cost is Rs 5,00,000 variable plus Rs 2,40,000 fixed, which is Rs 7,40,000, so cost per unit is Rs 74.

  1. ARs 74Correct
  2. BRs 80
  3. CRs 64
  4. DRs 54

Explanation

Variable cost = 6,40,000 - 2,40,000 = Rs 4,00,000, so Rs 50 per unit. At 10,000 units: variable = Rs 5,00,000 plus fixed Rs 2,40,000 = Rs 7,40,000, giving Rs 74 per unit. Rs 80 is wrong because it ignores that fixed cost per unit falls with higher output.

Did you get it right without looking?

One question tells you little. A timed set on Introduction to Cost and Management Accounting shows your real accuracy, how long you take and where you lose marks.

Practise Introduction to Cost and Management AccountingFree diagnostic mock

More Introduction to Cost and Management Accounting questions