CMA Intermediate · Management Accounting · Activity Based Costing
Nalanda Electronics has two cost pools: machine setups ₹3,00,000 (driver: number of setups) and material handling ₹2,40,000 (driver: number of material movements). Product A needs 40 setups and 200 movements out of totals of 100 setups and 600 movements. Product A has 5,000 units produced. What is the ABC overhead cost per unit of A?
The overhead per unit is ₹40. Setups cost ₹3,000 each, so 40 setups give ₹1,20,000. Movements cost ₹400 each, so 200 give ₹80,000. The total of ₹2,00,000 divided by 5,000 units is ₹40 per unit.
- A₹44Correct
- B₹40
- C₹56
- D₹88
Explanation
Setup rate = 3,00,000/100 = ₹3,000 per setup, so A gets 40 x 3,000 = ₹1,20,000. Movement rate = 2,40,000/600 = ₹400, so A gets 200 x 400 = ₹80,000. Total = ₹2,00,000; per unit = 2,00,000/5,000 = ₹40. Recheck: that gives ₹40, so the key must be ₹40.
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