CMA Final · Strategic Cost Management · Activity Based Cost Management
Dhruv Engineering uses ABC. Its quality inspection pool is Rs 4,80,000, expected to involve 2,400 inspection hours. A customised order needs 150 inspection hours and 500 units. Direct cost of the order is Rs 2,00,000. Using ABC for inspection only, what is the order's total cost including inspection?
The order costs Rs 2,30,000. The inspection rate is Rs 4,80,000 divided by 2,400 hours, which is Rs 200 per hour. The order uses 150 hours, so it absorbs Rs 30,000 of inspection cost, which is added to its direct cost of Rs 2,00,000.
- ARs 2,30,000Correct
- BRs 2,48,000
- CRs 3,00,000
- DRs 2,20,000
Explanation
Rate = 4,80,000/2,400 = Rs 200 per hour. Inspection for order = 150 x 200 = Rs 30,000. Total = 2,00,000 + 30,000 = Rs 2,30,000. Rs 3,00,000 wrongly uses 150 x Rs 200 x 10 style scaling or adds the whole pool; Rs 2,20,000 is another miscalculation.
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