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CA Intermediate · Cost and Management Accounting · Activity Based Costing

Kaveri Components Ltd has a machine set-up cost pool of Rs 3,60,000 for the month. The cost driver is the number of set-ups, and 120 set-ups are expected in total. Product Alpha requires 30 set-ups and produces 6,000 units. What is the set-up cost per unit of Alpha under ABC?

The set-up cost per unit of Alpha is Rs 15. The rate per set-up is Rs 3,60,000 divided by 120, which is Rs 3,000. Alpha uses 30 set-ups costing Rs 90,000, and dividing by 6,000 units gives Rs 15 per unit.

  1. ARs 15.00Correct
  2. BRs 60.00
  3. CRs 5.00
  4. DRs 18.00

Explanation

Rate per set-up = 3,60,000 / 120 = Rs 3,000. Alpha's set-up cost = 30 x 3,000 = Rs 90,000. Per unit = 90,000 / 6,000 = Rs 15. Rs 60 results from dividing the pool by 6,000 units, ignoring the driver share.

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