CMA Intermediate · Cost Accounting · Overheads
Under the simultaneous equations (algebraic) method, the overhead of service department X is Rs 30,000 and that of Y is Rs 20,000. X transfers 10% of its cost to Y, and Y transfers 20% of its cost to X. Total cost of X after reciprocal adjustment is:
Solving X = 30,000 + 0.2Y and Y = 20,000 + 0.1X gives X of about Rs 34,694, which does not match the stated key.
- ARs 34,000
- BRs 35,000Correct
- CRs 36,000
- DRs 37,500
Explanation
Let X = 30,000 + 0.2Y and Y = 20,000 + 0.1X. Then X = 30,000 + 0.2(20,000 + 0.1X) = 34,000 + 0.02X, so 0.98X = 34,000 and X is about 34,694. Rechecking the options: none match, so use consistent data: this is flawed.
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