Strategic Cost Management Assignment

Following are the questions. Solve it on your own as it is CAP component. It should be hand written on A4 sheet only. Last day for submission: 26 Sept. 2011 (late submission will not be entertained) THEORY SECTION: 1. Define Material Control. Explain in detail the various stages of Material Control? 2. What do you understand by Time and Motion study? In what ways it is connected with remuneration of Labour? 3. Define Overhead Absorption. Describe the various methods of absorption of Factory Overheads. Which of those methods do you consider most scientific and why? 4. What is Job Costing? Describe the procedure of Job Order Costing System. 5. Define Batch Costing. How it is different from Job Costing? PRACTICAL SECTION: 1. During the current year AB Ltd. showed a profit of Rs. 1, 80,000 on a sale ofRs.30,00,000. The variable expenses were Rs.21,00,000. You are required to work out; a. The break even sales at present b. The break even sale if variable cost prices increased by 5%. c. The break even sale to maintain the profit as at present, if the selling price is reduced by 5%. 2. A hypothetical company has prepared the following cost estimates for the manufacture of a sub component hitherto purchased from an outside supplier at Rs. 32 a unit; ordering and inspection cost are estimated at Rs. 2 a unit. The firm has spare capacity and no extra fixed costs will be required to be incurred. Rs. (per unit) Direct material 10 Direct Labour 14 Variable overheads 6 Fixed factory overheads (allocation) 6 Total cost per unit 36 Should the component be made or purchased from outside? 3. The following figures are extracted from the books of a manufacturing concern for the year 2010. Particulars Rs. Direct material 2,05,000 Direct labour 75,000 Fixed overheads 60,000 Variable overheads 1,00,000 Sales 5,00,000

Calculate the Break Even Point; what will be the effect on BEP of an increase of 10% in i. Fixed expenses ii. Variable expenses 4. There are 2 plans under same management. The management desire to merge these 2 plants. The following particulars are available. Details Plant 1 Plant 2 Capacity operation 100% 60% Sales( in lakh) 750 750 Variable cost (in lakh) 550 540 Fixed cost (in lakh) 100 120 You are required to calculatei. The merged plant capacity to be operated for the purpose of break even and ii. The profitability of working at 80% of the merged capacity. 5. A factory engaged in manufacturing buckets is working at 40% capacity and produces 10,000 buckets p.a. The present cost break-up for one bucket is around; Material Rs. 40, Labour Rs. 12, and Overheads Rs. 20(60% fixed). The selling price is Rs. 80 per bucket. If it decided to work the factory at 50% capacity; the S.P falls by 3% at 90% capacity; the S.P falls by 5% accompanied by a similar fall in the prices of material. You are required to calculate the profit at 50% & 90% capacities, and also calculate BEP for the same capacity production levels. 6. The united vision limited is considering expansion. Fixed cost amount to Rs. 4,60,000 and are expected to increase by Rs.1,40,000 when plant expansion is completed. The existing plant capacity is 32,000 units a year. Capacity will increase by 50% with the expansion. Variable costs are currently Rs. 17 per unit and are expected to go down by Rs. 1 per unit with expansion. The current S.P is Rs.40 per unit and is expected to remain same under either alternative. What are the BEP under either alternative? Which alternative is better and why? NOTE: It is strictly advised not to copy the answers otherwise your assignment will be rejected including original one and no marks will be awarded to any of the assignment.