DI: Mulchand Textiles Variable Cost Estimates

XAT 2011 · QADI · Hard · Data Interpretation

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Passage / data set

Answer questions based on the following information:

Mulchand Textiles produces a single product of only one quality – waterproof synthetic fabric. Cost estimates for different possible monthly output levels (in sq ft):

Output (sq ft)Labour cost (Rs.)Material cost (Rs.)
250002150011050
500004150022000
750006000033000
1000007800044000
1250009500054750
15000011100065700
17500013300076650
20000016000088000

Apart from labour and material costs, administrative cost is Rs. 40,000 per month. Electricity cost increases in GP till 150,000 sq ft (common ratio =5700/3800=1.5= 5700 / 3800 = 1.5), and then in AP for every 25,000 sq ft. Electricity cost at 25,000 sq ft is Rs. 3,800, at 50,000 sq ft is Rs. 5,700, at 175,000 sq ft is Rs. 38,856.50.

Question 1 of 3

The estimated cost per square feet of output is least for:

  1. A.

    75000 square feet output

  2. B.

    100000 square feet output

  3. C.

    125000 square feet output

  4. D.

    150000 square feet output

  5. E.

    175000 square feet output

Question 2 of 3

The estimated material cost included the cost of material that gets spoiled in the production process. Material spoilage cost per square feet of output vs monthly output graph showed spoilage costs as 0.042,0.04,0.04,0.04,0.038,0.038,0.038,0.040.042, 0.04, 0.04, 0.04, 0.038, 0.038, 0.038, 0.04. Estimated material usage cost per square feet of output:

  1. A.

    Decreases up to 125000 square feet of monthly output and then increases monotonically.

  2. B.

    Decreases up to 50000 square feet of monthly output, remains constant between 50000 and 100000, decreases between 100000 and 125000, remains constant between 125000 and 175000 and finally increases between 175000 and 200000 of monthly output.

  3. C.

    Remains constant for all levels of monthly output.

  4. D.

    Increases up to 50000 square feet of monthly output, remains constant between 50000 and 100000, increases between 100000 and 125000, remain constant between 125000 and 175000 and finally decreases between 175000 and 200000 of monthly output.

  5. E.

    Increases up to 100000 square feet of monthly output and then decreases monotonically.

Question 3 of 3

Which of the following diagrams would represent the estimates of electricity cost per square feet of output versus monthly output?

  1. A.

    Diagram A (Monotonically increasing)

  2. B.

    Diagram B (Decreases initially, then increases to 0.24)

  3. C.

    Diagram C (Stepwise increases)

  4. D.

    Diagram D (U-shaped curve starting high)

  5. E.

    Diagram E (Fluctuating curve)

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