CMA Intermediate · Cost Accounting · Batch Costing
Setup cost for a batch of 500 units is ₹10,000. Material is ₹60 per unit and labour is ₹40 per unit. Other overheads are absorbed at ₹10 per unit. What is the cost per unit?
Cost per unit is ₹130. Setup cost of ₹10,000 spread over 500 units gives ₹20 per unit, which is added to material ₹60, labour ₹40 and overheads ₹10. Ignoring setup cost would wrongly give ₹110.
- A₹130Correct
- B₹110
- C₹150
- D₹120
Explanation
Setup cost per unit is 10,000/500 = ₹20. Cost per unit = 60 + 40 + 10 + 20 = ₹130. The ₹110 option omits setup cost; ₹150 would double count setup.
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