CA Foundation · Accounting · Inventories
Gupta Manufacturing produced 10,000 units in a period. Direct materials were ₹5,00,000 and direct labour ₹2,00,000. Fixed production overheads were ₹3,00,000, based on a normal capacity of 15,000 units. Variable production overheads were ₹1,00,000. What is the cost per unit for valuing closing stock under AS 2?
Placeholder
- A₹10.00
- B₹11.00Correct
- C₹13.00
- D₹12.00
Explanation
Fixed overhead is allocated on normal capacity: 3,00,000 ÷ 15,000 = ₹20 per unit, so on 10,000 units ₹2,00,000 is absorbed. Total cost = 5,00,000 + 2,00,000 + 2,00,000 + 1,00,000 = ₹10,00,000. Per unit = ₹100. Recomputing: material 50, labour 20, fixed 20, variable 10 = ₹100 per unit. So none of the options listed matches unless units are scaled; the correct per-unit figure is ₹100.
Did you get it right without looking?
One question tells you little. A timed set on Inventories shows your real accuracy, how long you take and where you lose marks.
More Inventories questions
- As per AS 2 (Valuation of Inventories), at the balance sheet date inventories are generally valued at:
- Under AS 2, inventories are required to be valued at:
- Stock was counted on 5 April at ₹2,40,000 at cost. Between 1 April and 5 April, sales were ₹50,000 at a profit of 25% on sales, and purchase…
- Verma Ltd has a normal capacity of 20,000 units per year and fixed production overheads of ₹6,00,000. In the current year, due to a strike, …
- As per AS 2 (Valuation of Inventories), inventories are ordinarily valued at:
- Mehta Foods processes a main product and a by-product. Total joint processing cost is ₹5,00,000. The by-product is immaterial in value and c…