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CA Intermediate · Cost and Management Accounting · Unit & Batch Costing

Shree Tools Ltd. makes components in batches. For a batch of 2,000 units, the set-up cost is Rs 12,000, direct materials Rs 90,000, direct labour Rs 50,000, and factory overheads are absorbed at 60% of direct labour. Selling and distribution overheads are not part of the batch cost. What is the cost per unit of the batch?

The cost per unit is Rs 91. Total batch cost is set-up Rs 12,000 plus materials Rs 90,000, labour Rs 50,000 and overheads Rs 30,000, giving Rs 1,82,000, which divided by 2,000 units gives Rs 91.

  1. ARs 91Correct
  2. BRs 85
  3. CRs 96
  4. DRs 79

Explanation

Factory overheads = 60% x 50,000 = 30,000. Batch cost = 12,000 + 90,000 + 50,000 + 30,000 = 1,82,000. Per unit = 1,82,000/2,000 = Rs 91. Rs 85 omits the set-up cost (1,70,000/2,000).

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