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ACCA Applied Knowledge · Management Accounting · Cost accounting methods

Setting up a machine for each batch costs $900 regardless of batch size. Other variable cost is $4 per unit. Which of the following gives the cost per unit for a batch of 300 units?

The cost per unit is $7. The fixed batch setup cost of $900 is spread over 300 units, giving $3 per unit, and this is added to the variable cost of $4 per unit. Total batch cost is $2,100.

  1. A$3.00
  2. B$4.00
  3. C$7.00Correct
  4. D$6.00

Explanation

Setup cost per unit = 900/300 = $3. Add variable cost of $4 to give $7 per unit. Total cost is 900 + 1,200 = $2,100, and 2,100/300 = $7.

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