Management Accounting Test Questions

Q.  ABC Ltd manufactures a single product and sales for Rs 30 per unit. There is increased demand of the product. The Direct Material is Rs 8, Direct labour (2 hours) is Rs 4 and Variable overheads is Rs 4. The labour force is working at full capacity and no extra time is available. Mr. X has approached ABC Ltd with a request for manufacture special order at Rs 8,000. Also, 600 hours labour will be required and cost of the order will be Rs 3000 for Direct Material. Variable overhead per hour will be Rs 2. Should the order be accepted? Why?

a. Yes, Net Profit Rs 1,600
b. No, Net loss Rs 1,600
c. No, Net loss Rs 2,000
d. Yes Net Profit Rs 2,000

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