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CMA Foundation · Fundamentals of Financial and Cost Accounting · Cost, Cost Centre, Cost Unit and Cost Drivers

Sharma Components Ltd has a set-up cost pool of Rs 3,60,000 for a period, and 120 set-ups are performed. Product Alpha needs 30 set-ups and produces 6,000 units. Using set-ups as the cost driver, the set-up cost per unit of Alpha is:

The set-up cost per unit of Alpha is Rs 15. The cost driver rate is Rs 3,60,000 divided by 120 set-ups, which is Rs 3,000 per set-up. Alpha uses 30 set-ups, giving Rs 90,000, and dividing by 6,000 units gives Rs 15.

  1. ARs 15.00Correct
  2. BRs 60.00
  3. CRs 6.00
  4. DRs 50.00

Explanation

Rate per set-up = 3,60,000 / 120 = Rs 3,000. Alpha's charge = 30 x 3,000 = Rs 90,000. Per unit = 90,000 / 6,000 = Rs 15. Rs 60 results from dividing the whole pool by units of Alpha alone, without using the driver.

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