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CA Intermediate · Cost and Management Accounting · Activity Based Costing

Bhavna Foods Ltd has a quality testing pool of Rs 2,40,000 and a packing pool of Rs 1,80,000. Testing is driven by 800 batch tests and packing by 3,600 packing hours. Product P uses 200 batch tests and 1,200 packing hours and has 2,000 units produced. What is the total ABC overhead per unit of P?

The ABC overhead per unit of P is Rs 60. Testing costs Rs 300 per test, so 200 tests cost Rs 60,000. Packing costs Rs 50 per hour, so 1,200 hours cost Rs 60,000. The total of Rs 1,20,000 divided by 2,000 units gives Rs 60.

  1. ARs 70Correct
  2. BRs 60
  3. CRs 105
  4. DRs 85

Explanation

Testing rate = 2,40,000/800 = Rs 300; P = 200 x 300 = 60,000. Packing rate = 1,80,000/3,600 = Rs 50; P = 1,200 x 50 = 60,000. Total = 1,20,000; per unit = 1,20,000/2,000 = Rs 60. Rs 60 is correct, so the option marked 70 is wrong.

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