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CMA Final · Strategic Cost Management · Activity Based Cost Management

Himalaya Foods makes two products. Pool costs: ordering Rs 2,40,000 (driver: purchase orders, 800 total), and customer-support Rs 1,80,000 (driver: service calls, 600 total). Product X: 5,000 units, 300 orders, 150 calls, direct cost Rs 40 per unit. Product Y: 2,000 units, 500 orders, 450 calls, direct cost Rs 60 per unit. What is the full ABC cost per unit of Y?

Y's overhead is Rs 2,85,000 from 500 orders and 450 calls at Rs 300 each. Per unit that is Rs 142.50, and adding direct cost of Rs 60 gives Rs 202.50 per unit.

  1. ARs 60.00
  2. BRs 192.50
  3. CRs 195.00
  4. DRs 217.50Correct

Explanation

Order rate = 2,40,000/800 = Rs 300; support rate = 1,80,000/600 = Rs 300. Y overhead = 500x300 + 450x300 = 1,50,000 + 1,35,000 = Rs 2,85,000, i.e. Rs 142.50 per unit. Adding direct cost Rs 60 gives Rs 202.50? Recheck: 2,85,000/2,000 = 142.50, plus 60 = 202.50, which is not among the options, so the key is flawed.

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