CMA Intermediate · Management Accounting · Standard Costing and Variance Analysis (Management Accounting)
Kaveri Textiles budgets 8,000 machine hours for the month at a budgeted fixed overhead of ₹2,40,000. Its standard output is 4 units per machine hour. What is the standard fixed overhead rate per unit?
The standard fixed overhead rate is ₹7.50 per unit. Budgeted output is 8,000 hours times 4 units, or 32,000 units, and dividing ₹2,40,000 by 32,000 gives ₹7.50. The ₹30 figure is the rate per machine hour, not per unit.
- A₹7.50Correct
- B₹30.00
- C₹10.00
- D₹60.00
Explanation
Budgeted output = 8,000 x 4 = 32,000 units. Rate per unit = 2,40,000 / 32,000 = ₹7.50. Check: ₹7.50 x 4 = ₹30 per hour = 2,40,000 / 8,000. The ₹30 option is the rate per machine hour, the wrong base.
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