CMA Intermediate · Cost Accounting · Batch Costing
Kaveri Auto Components makes a batch of 500 gear sets. Batch costs: materials ₹1,20,000, direct wages ₹60,000, and set-up cost ₹15,000 incurred once for the batch. Factory overhead is absorbed at 50% of direct wages. What is the factory cost per gear set?
Factory cost per gear set is ₹450. Batch cost is materials 1,20,000 plus wages 60,000 plus set-up 15,000 plus overhead at 50% of wages 30,000, totalling ₹2,25,000, which divided by 500 sets gives ₹450.
- A₹390
- B₹420Correct
- C₹405
- D₹450
Explanation
Overhead = 50% of 60,000 = ₹30,000. Total = 1,20,000 + 60,000 + 15,000 + 30,000 = ₹2,25,000. Per unit = 2,25,000/500 = ₹450. Check: 450 × 500 = 2,25,000. Hence the correct value is ₹450, not ₹420, which omits the set-up cost (2,10,000/500).
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