CMA Intermediate · Management Accounting · Applications of Marginal Costing in Short Term Decision Making
Verma Industries makes products A and B from a scarce material limited to 4,800 kg. A: contribution ₹72 per unit, 3 kg per unit. B: contribution ₹80 per unit, 4 kg per unit. Maximum demand is 1,000 units of A and 800 units of B. What is the maximum total contribution?
The computed maximum contribution is ₹1,08,000, which is not among the options, so this question is invalid.
- A₹1,12,000
- B₹1,15,200Correct
- C₹1,06,400
- D₹1,20,000
Explanation
Contribution per kg: A = 72/3 = ₹24; B = 80/4 = ₹20. Make A first: 1,000 units use 3,000 kg, giving ₹72,000. Remaining 1,800 kg make 450 units of B (demand allows), giving ₹36,000. Total = ₹1,08,000. Recheck against options: this does not equal any option, so the question is flawed.
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