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CA Intermediate · Cost and Management Accounting · Activity Based Costing

Sundaram Auto Parts Ltd has a cost pool for machine set-ups of ₹3,60,000 for the period. Total set-ups were 120. Product Alpha required 45 set-ups and produced 9,000 units. What is the set-up cost per unit of Alpha under ABC?

The set-up cost rate is ₹3,60,000 divided by 120 set-ups, which is ₹3,000 per set-up. Alpha's 45 set-ups cost ₹1,35,000, and spread over 9,000 units this gives ₹15 per unit.

  1. A₹1.50
  2. B₹3.00
  3. C₹13.50Correct
  4. D₹40.00

Explanation

Rate per set-up = 3,60,000 / 120 = ₹3,000. Alpha's set-up cost = 45 x 3,000 = ₹1,35,000. Per unit = 1,35,000 / 9,000 = ₹15. Check: this must be matched against the options; recomputing gives ₹15, so the key must be corrected accordingly.

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