CMA Intermediate · Management Accounting · Activity Based Costing
Rohan Engineering uses ABC. Its activity cost pool for machine setups is ₹3,20,000 and the budgeted number of setups is 400. Product Alpha has 5 batches of 200 units each, with one setup per batch. What is the setup cost per unit of Alpha?
The setup cost is ₹4 per unit. The rate is ₹3,20,000 divided by 400 setups, or ₹800 per setup. Alpha has 5 setups costing ₹4,000 in total, spread over 1,000 units (5 batches of 200), which gives ₹4 per unit.
- A₹4Correct
- B₹800
- C₹4,000
- D₹0.80
Explanation
Rate per setup = 3,20,000/400 = ₹800. Alpha setups = 5, so cost = ₹4,000. Units = 5 x 200 = 1,000. Cost per unit = 4,000/1,000 = ₹4. Option ₹800 is the cost per setup, and ₹4,000 is the total, not per unit.
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