MGT402 Final Term Objective

MGT402 Solved MCQs With Explanation & Reference · The following data related to production of ABC Company: · Units produced · 8,000 · units · Direct materials · Rs.6 · Direct labor · Rs.12 · Fixed overhead · Rs.24000 · Variable overhead · Rs.6 · Fixed selling and administrative · Rs.2000 · Variable · selling · and · administrative · Rs.2

Using the data given above, what will be the unit product cost under marginal costing?

1. Rs. 22
2. Rs. 24
3. Rs. 28
4. Rs. 30

Correct answer: Rs. 24

=16+12+6=24

Selling and admin exp are not added in marginal costing

Brutus Company manufactures glass bottles. The company expects to sell 500,000 bottles next year. The budgeted ending inventory this year is 15,000 bottles and the desired ending inventory for next year is 12,000 bottles. It takes 5 pounds of sand to produce one bottle. The ending inventory of sand this year is expected to be 200,000 pounds, and the desired ending inventory next year is 100,000 pounds. The amount of direct material purchases is expected to be:

1. 2,385,000 pounds
2. 2,465,000 pounds
3. 2,585,000 pounds
4. 2,600,000 pounds

Correct answer: 2,385,000 pounds

Proposal Budget=E.Sales+Desire units-actual units*per unit cost

=500000+12000-15000=497000*5=2485000

=2485000+100000-200000=2385000

BDH produced 30,500 units of Kisty (a product). Each unit of Kisty takes two units of component L. Component L is budgeted to cost Rs. 12 per unit. Current inventory of L is 4,000 units. BDH wants 6,000 units of L on hand at the end of the next year. How much will the direct materials budget show as the cost of materials to be purchased?

1. Rs. 756,000
2. Rs. 390,000
3. Rs. 684,000
4. Rs. 330,000

Correct answer: Rs. 390,000

Proposal Budget=E.Sales+Desire units-actual units*per unit cost

=30500+6000-4000=32500*12=390000

Railway Product Ltd makes one product that sells for Rs. 72 per unit. Fixed costs are Rs. 81,000 per month & the product has a contribution to sales ratio of 37.5%. In a period when actual sales were Rs. 684,000 the company's unit margin of safety was:

1. 4,000 units
2. 4,800 units
3. 5,500 units
4. 6,500 units

Correct answer: 6,500 units

Safety Margin in units=Sales in units-Break even in units · Sales in units=684000/72=9500 · Fixed exp in units= 81000/72=1125

Break even in units = Fixed Exp. In units/Contribution ratio

= 1125/0.375=3000

Safety Margin =9500-3000=6500

Contribution Margin Ratio is:

Totalcontribution Margin/ Sales. Sales / Contribution Margin per unit. Fixed cost/ Contribution margin per unit. Sales / Variable costs.

Contribution Margin and Contribution Margin Ratio

Formulas to calculate contribution margin and contribution margin ratio:

Contribution Margin = sales - variable costs. Contribution Margin Ratio = (sales - variable costs)/sales.