CMA Final · Cost and Management Audit · Management Audit in Different Functions
While auditing the production function of a manufacturing company, a management auditor wants to assess how effectively capacity is being utilised. Which indicator is most relevant?
The ratio of actual output to practically achievable capacity, supported by analysis of idle time and bottlenecks, is the relevant indicator. It directly shows how well production resources are used, unlike selling expense ratios, training attendance or share price movements, which concern other areas.
- ARatio of actual output to the practically achievable capacity, along with analysis of idle time and bottlenecksCorrect
- BRatio of selling expenses to sales
- CNumber of employees attending training programmes
- DGrowth in the share price of the company
Explanation
Capacity utilisation is measured by comparing actual output to achievable capacity, and by analysing idle time, breakdowns and bottlenecks. Selling expense ratios relate to marketing, training attendance relates to HR, and share price is an external market measure.
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