CA Intermediate · Cost and Management Accounting · Activity Based Costing
Ganga Electronics has total overheads of ₹6,00,000 comprising machine set-up ₹2,00,000 (driver: 100 set-ups), inspection ₹1,50,000 (driver: 300 inspections) and packing ₹2,50,000 (driver: 500 packing orders). Product Z uses 20 set-ups, 90 inspections and 100 packing orders. What total overhead is assigned to Z under ABC?
Z is assigned ₹1,35,000: ₹40,000 for set-ups, ₹45,000 for inspections and ₹50,000 for packing orders.
- A₹1,45,000Correct
- B₹1,10,000
- C₹2,00,000
- D₹1,75,000
Explanation
Set-up rate = 2,00,000/100 = ₹2,000, so Z = 40,000. Inspection rate = 1,50,000/300 = ₹500, so Z = 45,000. Packing rate = 2,50,000/500 = ₹500, so Z = 50,000. Total = 40,000 + 45,000 + 50,000 = ₹1,35,000. The correct total is ₹1,35,000.
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