CMA Final · Cost and Management Audit · Management Audit in Different Functions
While auditing the production function, a management auditor finds that the plant's actual output is 72,000 units against a designed capacity of 100,000 units and an achievable (practical) capacity of 80,000 units. What is the capacity utilisation against practical capacity?
Capacity utilisation against practical capacity is 90 percent, found by dividing actual output of 72,000 units by practical capacity of 80,000 units. Using designed capacity of 100,000 units would give 72 percent, which is a different measure and not what the question asks.
- A72%
- B80%
- C90%Correct
- D110%
Explanation
Utilisation against practical capacity = 72,000 / 80,000 = 90%. The 72% figure wrongly uses designed capacity as the base. 80% is simply the practical-to-designed ratio, and 110% inverts the ratio (80,000/72,000).
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