CA Intermediate · Cost and Management Accounting · Activity Based Costing
Kaveri Components Ltd. has a quality inspection cost pool of Rs 3,60,000 for the period. The cost driver is the number of inspections, and 1,200 inspections were carried out in total. Product Alpha required 300 inspections and produced 6,000 units. What is the inspection cost per unit of Alpha under ABC?
The inspection cost per unit of Alpha is Rs 15. The cost driver rate is Rs 3,60,000 divided by 1,200 inspections, giving Rs 300 per inspection. Alpha's 300 inspections cost Rs 90,000, which spread over 6,000 units gives Rs 15 per unit.
- ARs 15.00Correct
- BRs 60.00
- CRs 18.00
- DRs 7.50
Explanation
Rate per inspection = 3,60,000 / 1,200 = Rs 300. Cost to Alpha = 300 x 300 = 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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