Meri Chai Teri Chai Ltd., is engaged in manufacturing three products: - Ginger Chai - Masala Chai - Saffron Chai It calculates activity cost rates…

Working Note: Cost Driver Rates- Activity Cost (₹) Cost Driver Basis Cost Driver (Units) Cost Driver Rate (₹) Setup 7,68,000 Number of setups 64 12,000 per setup Processing 7,00,000 Machine Hours 1,40,000 5 per machine hour Inspection 6,80,000 Number of inspections 544 1,250 per inspection Packaging 7,20,000 Number of packings 600 1,200 per packing (i) Computation of cost allocated to each product - Activity Based Costing Products Ginger Chai (₹) Masala Chai (₹) Saffron Chai (₹) Setup Costs @12,000 per setup (21,22,17) 2,52,000 2,64,000 2,04,000 Machine Processing Costs @5 per hour (45,000, 50,000, 40,000) 2,25,000 2,50,000 2,00,000 Inspection Costs @1,250 per inspection (190,204,150) 2,37,500 2,55,000 1,87,500 Packaging Costs @1,200 per packing (190,250,150) 2,28,000 3,00,000 1,80,000 Total Costs 9,42,500 10,69,000 7,71,500 (ii) Computation of cost of unused capacity for each activity Activity Unused Capacity Total Cost (₹) Setup Costs @12,000 per setup 4 setups 48,000 Machine Processing Costs @5 per hour 5,000 machine hours 25,000 Inspection Costs @1,250 per inspection - - Packaging Costs @1,200 per packing 10 packings 12,000 Total Costs 85,000