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CA Intermediate · Cost and Management Accounting · Unit & Batch Costing

Mehta Engineering uses batch costing for a component. For a batch of 2,000 units, the data are: materials ₹1,20,000, direct wages ₹60,000, machine set-up cost ₹15,000 per batch, and factory overheads absorbed at 50% of direct wages. What is the cost per unit of the batch?

The cost per unit is ₹112.50. Batch cost totals materials ₹1,20,000, wages ₹60,000, set-up ₹15,000 and overheads ₹30,000 (50% of wages), making ₹2,25,000, which divided by 2,000 units gives ₹112.50.

  1. A₹108.00
  2. B₹112.50Correct
  3. C₹115.00
  4. D₹100.00

Explanation

Overheads = 50% of 60,000 = 30,000. Total = 1,20,000 + 60,000 + 15,000 + 30,000 = 2,25,000. Per unit = 2,25,000 / 2,000 = ₹112.50. Omitting the set-up cost gives 2,10,000/2,000 = ₹105, and ₹108 is not supported.

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