Skip to content

CMA Intermediate · Management Accounting · Forecasting, Budgeting and Budgetary Control

Kaveri Plastics budgets production of 8,000 units. Each unit needs 3 kg of resin. Opening resin stock is 4,000 kg and the closing stock is to be 6,500 kg. Resin costs Rs 40 per kg. What is the budgeted material purchase cost?

The budgeted purchase cost is Rs 10,60,000. Consumption is 24,000 kg (8,000 units x 3 kg); adding the closing stock of 6,500 kg and deducting the opening stock of 4,000 kg gives purchases of 26,500 kg, which at Rs 40 per kg costs Rs 10,60,000.

  1. ARs 9,40,000
  2. BRs 10,60,000Correct
  3. CRs 9,60,000
  4. DRs 11,40,000

Explanation

Resin consumption = 8,000 x 3 = 24,000 kg. Purchases = 24,000 + 6,500 - 4,000 = 26,500 kg. Cost = 26,500 x 40 = Rs 10,60,000. Rs 9,40,000 results from reversing the stock adjustment (23,500 kg), and Rs 9,60,000 is consumption alone.

Did you get it right without looking?

One question tells you little. A timed set on Forecasting, Budgeting and Budgetary Control shows your real accuracy, how long you take and where you lose marks.

Practise Forecasting, Budgeting and Budgetary ControlFree diagnostic mock

More Forecasting, Budgeting and Budgetary Control questions