ICAEW BIP · Chapter 2 · Question 10 of 12
A company uses activity-based costing. Set-up costs for the period are £84,000 and there are 120 set-ups. Product P is made in batches of 500 units, needs 18 set-ups in the period, and its output is 9,000 units. What is the set-up cost per unit of product P?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) £1.40
Explanation
Cost driver rate = £84,000 / 120 set-ups = £700 per set-up. Set-up costs traced to product P = 18 x £700 = £12,600. Cost per unit = £12,600 / 9,000 = £1.40.
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