CMA Final · Strategic Cost Management · Pricing Decisions and Strategies
Sundaram Fabrics Ltd. uses cost-plus pricing on full cost. For a batch of 2,000 units, direct material is Rs 120 per unit, direct labour Rs 60 per unit, variable overhead Rs 20 per unit, and fixed overhead absorbed is Rs 40 per unit. The firm adds a 25% mark-up on full cost. What is the selling price per unit?
The selling price is Rs 300 per unit. Full cost is Rs 240 (120 plus 60 plus 20 plus 40), and a 25% mark-up on full cost adds Rs 60. Excluding fixed overhead would give a wrong base of Rs 200 and a price of Rs 250.
- ARs 250Correct
- BRs 275
- CRs 300
- DRs 325
Explanation
Full cost per unit = 120 + 60 + 20 + 40 = Rs 240. Mark-up 25% of 240 = Rs 60, so price = Rs 300. Rs 250 would come from marking up only 200 (excluding fixed overhead), which is wrong because the mark-up is on full cost. Correct option is therefore Rs 300.
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