CMA Intermediate · Management Accounting · Activity Based Costing
Nair Plastics Ltd has a machine running pool of ₹7,20,000 allocated on 9,000 machine hours, and an inspection pool of ₹2,40,000 allocated on 400 inspections. A batch of 500 units uses 600 machine hours and 20 inspections. What is the overhead cost per unit of this batch?
Machine cost is ₹80 per hour, giving ₹48,000 for 600 hours. Inspection costs ₹600 each, giving ₹12,000 for 20 inspections. Total ₹60,000 divided by 500 units gives ₹120 overhead per unit.
- A₹108Correct
- B₹120
- C₹96
- D₹138
Explanation
Machine rate = 7,20,000/9,000 = ₹80 per hour; 600 × 80 = ₹48,000. Inspection rate = 2,40,000/400 = ₹600; 20 × 600 = ₹12,000. Total = ₹60,000. Per unit = 60,000/500 = ₹120. So the correct value is ₹120, option 1, not option 0.
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