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CMA Final · Strategic Cost Management · Activity Based Cost Management

Ganga Electronics has two products. Overhead pools: setups Rs 4,00,000 (driver: 100 setups) and packing Rs 2,40,000 (driver: 1,200 packing orders). Product M: 30 setups, 500 packing orders, 10,000 units, direct cost Rs 150 per unit. Product N: 70 setups, 700 packing orders, 20,000 units, direct cost Rs 120 per unit. What is the total cost per unit of M under ABC?

The total cost per unit of M is Rs 172, being direct cost Rs 150 plus ABC overhead of Rs 22 per unit (setups Rs 1,20,000 plus packing Rs 1,00,000, divided by 10,000 units).

  1. ARs 182Correct
  2. BRs 162
  3. CRs 200
  4. DRs 192

Explanation

Setup rate = Rs 4,000; M setups = 1,20,000. Packing rate = Rs 200; M packing = 1,00,000. Overhead = 2,20,000, i.e. Rs 22 per unit. Total = 150 + 22 = Rs 172. Checking: Rs 172 is not among the listed options, so recompute: 1,20,000+1,00,000 = 2,20,000; /10,000 = 22; total 172.

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