CIMA BA2 · Chapter 5 · Question 3 of 10
A batch of 500 identical souvenir mugs incurred the following costs: materials $3,400, direct labour $1,250, machine set-up $350 and production overheads $1,500. What is the cost per mug?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $13.00
Explanation
Total batch cost = $3,400 + $1,250 + $350 + $1,500 = $6,500. Cost per unit = $6,500 / 500 = $13.00. The set-up cost is a cost of the batch and must be included before dividing by the number of units.
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