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CMA Intermediate · Cost Accounting · Job Costing

Job 41 of Kaveri Engineering incurred direct material Rs 40,000, direct labour Rs 25,000 and factory overheads absorbed Rs 15,000. During production, 10 units out of 100 were rejected as defective; rectifying them costs Rs 2,000 and this is normal for the job, to be borne by good units. What is the cost per good unit if the rectification cost is charged to this job?

The cost per unit is Rs 820. Total job cost of Rs 80,000 plus rectification of Rs 2,000 gives Rs 82,000. Since the defective units are reworked into good units, all 100 units are saleable, so the cost is divided by 100.

  1. ARs 800
  2. BRs 802
  3. CRs 820Correct
  4. DRs 880

Explanation

Total cost = 40,000 + 25,000 + 15,000 = 80,000. Add rectification Rs 2,000 = 82,000. Defectives are reworked into good units, so all 100 units are good after rework: 82,000/100 = Rs 820. Rs 802 divides wrongly; Rs 880 divides by 93 units, wrongly deducting defectives, ignoring rework.

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