CA Intermediate · Cost and Management Accounting · Unit & Batch Costing
Sharma Pens Ltd manufactures pens in batches. For a batch of 2,000 pens, the costs are: direct materials ₹40,000, direct wages ₹24,000, and factory overheads absorbed at 150% of direct wages. Administrative overheads are 10% of factory cost. What is the total cost per pen for this batch?
The cost per pen is ₹55. Factory overheads are ₹36,000, giving factory cost of ₹1,00,000. Adding administrative overheads of ₹10,000 (10% of factory cost) gives total cost of ₹1,10,000, which divided by 2,000 pens equals ₹55 per pen.
- A₹55.00Correct
- B₹50.00
- C₹49.60
- D₹60.50
Explanation
Factory overheads = 150% × 24,000 = 36,000. Factory cost = 40,000 + 24,000 + 36,000 = 1,00,000. Administrative overheads = 10% × 1,00,000 = 10,000. Total cost = 1,10,000; per pen = 1,10,000 / 2,000 = ₹55. Option ₹50 ignores administrative overheads.
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