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CA Intermediate · Cost and Management Accounting · Service Costing

Meera Canteen served 6,000 meals in a month. Total costs were Rs 1,80,000 including Rs 30,000 of fixed cost. If the canteen serves 8,000 meals in the next month with the same fixed cost and the same variable cost per meal, what is the total cost?

Total cost for 8,000 meals is Rs 2,30,000. Variable cost per meal is (1,80,000 - 30,000) / 6,000 = Rs 25, so variable cost for 8,000 meals is Rs 2,00,000. Adding the unchanged fixed cost of Rs 30,000 gives Rs 2,30,000.

  1. ARs 2,40,000
  2. BRs 2,30,000Correct
  3. CRs 2,10,000
  4. DRs 2,50,000

Explanation

Variable cost = 1,80,000 - 30,000 = 1,50,000. Variable cost per meal = 1,50,000 / 6,000 = Rs 25. For 8,000 meals variable cost = Rs 2,00,000. Add fixed Rs 30,000 to get Rs 2,30,000. Rs 2,40,000 wrongly scales total cost proportionally (30 x 8,000).

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