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CMA Final · Strategic Cost Management · Uniform Costing and Inter-firm Comparison

Three firms in a uniform costing scheme report the following for the year: Firm P, conversion cost ₹9,00,000 for 30,000 units; Firm Q, ₹12,00,000 for 50,000 units; Firm R, ₹7,50,000 for 25,000 units. Firm Q then discovers it had excluded ₹1,00,000 of factory depreciation that the uniform manual requires to be included. What is Firm Q's corrected conversion cost per unit and its rank (1 = lowest cost) among the three after correction?

Corrected Firm Q cost is ₹13,00,000 over 50,000 units, which is ₹26 per unit. Firms P and R are both at ₹30, so Q has the lowest cost and ranks first after the correction.

  1. A₹26 per unit, rank 1
  2. B₹24 per unit, rank 1
  3. C₹26 per unit, rank 2Correct
  4. D₹28 per unit, rank 3

Explanation

Firm P = 9,00,000/30,000 = ₹30. Firm R = 7,50,000/25,000 = ₹30. Firm Q corrected = (12,00,000+1,00,000)/50,000 = ₹26. Q is therefore the lowest, rank 1. Re-reading: ₹26 with rank 1 would be correct, so the listed key is wrong.

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