The actual output of 162,500 units and actual fixed costs of Rs 87000 were exactly as budgeted. However, the actual expenditure of Rs 300,000 was Rs 18,000 over budget. What was the budget variable cost per unit?

[amp_mcq option1=”Rs 1.20″ option2=”Rs 1.31″ option3=”Rs1.42″ option4=”Rs 1.50″ correct=”option2″]

The correct answer is: B. Rs 1.31

The budget variable cost per unit can be calculated as follows:

Budgeted variable cost per unit = (Budgeted total variable cost – Budgeted fixed cost) / Budgeted output

= (300,000 – 87,000) / 162,500

= Rs 1.31

The other options are incorrect because they do not take into account the budgeted fixed cost.