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CMA Intermediate · Management Accounting · Activity Based Costing

Vihar Foods Ltd uses ABC. Total overhead of ₹6,00,000 is made of ordering ₹2,40,000 (driver: 800 purchase orders) and quality control ₹3,60,000 (driver: 1,200 inspections). Product P consumes 25% of the purchase orders and 40% of the inspections. P has 4,000 units, direct material ₹150 and direct labour ₹50 per unit. What is the total cost per unit of P under ABC?

Overhead to P is ₹60,000 plus ₹1,44,000, which is ₹2,04,000, or ₹51 per unit. Adding direct material ₹150 and labour ₹50 gives ₹251. No listed option matches, so the question is flawed.

  1. A₹246Correct
  2. B₹228
  3. C₹264
  4. D₹276

Explanation

Ordering to P = 25% x 2,40,000 = ₹60,000. Inspection to P = 40% x 3,60,000 = ₹1,44,000. Total overhead = ₹2,04,000; per unit = 2,04,000/4,000 = ₹51. Total cost = 150 + 50 + 51 = ₹251. This does not match the listed key, so the item is flawed.

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