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CMA Foundation · Fundamentals of Financial and Cost Accounting · Statement of Cost and Profit (Cost Sheet)

Iyer Engineering has prime cost of Rs 3,00,000. Factory overheads are 25% of prime cost, and administration overheads are 10% of factory cost. There is no work-in-progress. It produces 5,000 units and wants a profit of 20% on cost. What is the selling price per unit?

The selling price per unit is Rs 99.00. Factory cost is 3,75,000 after 25% overheads on prime cost; adding 10% administration overheads gives total cost 4,12,500. Adding 20% profit on cost gives sales of 4,95,000, which divided by 5,000 units equals Rs 99 per unit.

  1. ARs 99.00
  2. BRs 90.00
  3. CRs 118.80Correct
  4. DRs 82.50

Explanation

Factory overheads = 75,000, so factory cost = 3,75,000. Administration overheads = 37,500, so cost of production = 4,12,500. Profit at 20% on cost = 82,500, giving sales of 4,95,000. Per unit = 4,95,000 / 5,000 = Rs 99.00. Check carefully: 4,95,000/5,000 = 99, so the correct option is Rs 99.00.

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