CA Intermediate · Cost and Management Accounting · Activity Based Costing
Kaveri Electricals uses ABC. Overheads: Material handling ₹2,40,000 (driver: 800 material movements) and Quality inspection ₹1,80,000 (driver: 600 inspections). Product X uses 200 movements and 150 inspections; it makes 1,000 units. Prime cost of X is ₹300 per unit. What is the total cost per unit of X?
The total cost per unit of X is ₹405. Material handling at ₹300 per movement gives ₹60,000 and inspection at ₹300 per inspection gives ₹45,000, together ₹1,05,000 or ₹105 per unit. Adding the prime cost of ₹300 gives ₹405.
- A₹405Correct
- B₹360
- C₹345
- D₹375
Explanation
Handling rate = 2,40,000/800 = ₹300 per movement; X gets 200 × 300 = ₹60,000. Inspection rate = 1,80,000/600 = ₹300; X gets 150 × 300 = ₹45,000. Total overhead = ₹1,05,000, or ₹105 per unit. Total cost = 300 + 105 = ₹405. Omitting inspection gives ₹360.
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