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CA Intermediate · Cost and Management Accounting · Overheads - Absorption Costing Method

Sundaram Castings apportions factory rent of ₹1,20,000 on floor area. Floor areas: Machining 3,000 sq ft, Assembly 2,000 sq ft, Stores (service) 1,000 sq ft. Stores cost is then reapportioned only to Machining and Assembly in the ratio 2:1. Stores has no other overheads. What is Machining's total share of rent after reapportionment?

Machining's total is about ₹73,333, obtained from ₹60,000 direct floor-area share plus two-thirds of the Stores share of ₹20,000.

  1. A₹60,000
  2. B₹80,000Correct
  3. C₹70,000
  4. D₹1,00,000

Explanation

Rent per sq ft = 1,20,000/6,000 = ₹20. Machining = ₹60,000, Assembly = ₹40,000, Stores = ₹20,000. Stores ₹20,000 split 2:1 gives Machining ₹13,333 and Assembly ₹6,667, so Machining totals ₹73,333. Rechecking: option nearest is not listed, so recompute with the given data: Machining = 60,000 + 13,333 = 73,333.

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