CA Intermediate · Cost and Management Accounting · Activity Based Costing
Konark Appliances has a quality inspection cost pool of ₹4,80,000 for the period. The cost driver is the number of inspections, and a total of 600 inspections were carried out. Product A required 150 inspections and 3,000 units of A were produced. What is the inspection cost per unit of Product A under ABC?
The inspection cost per unit of Product A is ₹40. The driver rate is ₹4,80,000 divided by 600 inspections, which is ₹800 per inspection. Product A uses 150 inspections, so ₹1,20,000 is traced to it, and dividing by 3,000 units gives ₹40.
- A₹40Correct
- B₹160
- C₹200
- D₹800
Explanation
Cost driver rate = 4,80,000 / 600 = ₹800 per inspection. Cost traced to A = 150 × 800 = ₹1,20,000. Per unit = 1,20,000 / 3,000 = ₹40. Option ₹160 divides the entire pool by A's units, ignoring the share of inspections used by A; ₹800 is just the driver rate.
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