CMA Final · Strategic Cost Management · Benchmarking
Ganga Pharma's cost per unit of its packaging process is Rs 24 against a benchmark of Rs 20. Its annual output is 3,00,000 units. Which percentage represents the cost gap relative to the benchmark, and what is the total annual cost gap?
The gap is 20% of the benchmark and Rs 12,00,000 in total. The Rs 4 per-unit difference divided by the benchmark cost of Rs 20 gives 20%, and multiplying Rs 4 by 3,00,000 units gives Rs 12,00,000. Using own cost as the base would wrongly give 16.67%.
- A16.67% and Rs 12,00,000
- B20% and Rs 12,00,000Correct
- C20% and Rs 1,20,000
- D16.67% and Rs 1,20,000
Explanation
Gap per unit = 24 - 20 = Rs 4. Relative to the benchmark: 4/20 = 20%. Total gap = 4 x 3,00,000 = Rs 12,00,000. The 16.67% figure wrongly uses own cost (4/24) as the base.
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