CAF-5 · Chapter 18 · Question 14 of 20
(Activity-Based Costing & Product Profitability) Total OH Rs. 800,000 (Inspection: 300k, 600 total; Machine: 500k, 10,000 total). Product Omega uses 2,000 MH and 250 inspections. What is the difference (ABC - Traditional)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) ABC allocates Rs. 65,000 more to Omega
Explanation
Traditional: (800k/10k)*2k = 160,000. ABC: (300k/600)*250 + (500k/10k)*2k = 125,000 + 100,000 = 225,000. Diff = 225k - 160k = Rs. 65,000 higher under ABC.
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