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Strategic Cost Management NMIMS Sep 2020

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Strategic Cost Management NMIMS Sep 2020

Q1. X Ltd has to replace its machine and the production manager has to decide between Machine A and Machine B. Machine A is having installation cost of 160 and annual electric bill 200. Machine B has installation cost of 760 and annual electric bill of Rs. 80. If both have life of 8 years which machine will you recommend if interest rate is 9 %? P/V factor @ 9 % for 8 years is 5.5348

Q2. A company manufacturing two products furnishes the following data for a year.

Tabl*

The annual Overheads are as under:

Tab*

You are required to calculate cost per unit of each product A & B based on
i. Traditional method of charging overhead and
ii. Activity based costing method

Q3. Following information is available from the books of ABC Ltd. As of March 31st 2020 a listed company.
Tab*

a. Calculate the current ratio, quick ratio and debt equity ratio (5 Marks)
b. The company reported earnings after taxes of Rs. 2 crores. Assuming PE ratio of 10, calculate the theoretical stock prices of ABC Ltd.

 

Previous June Assignment

Q1. A company has a contribution/sales ratio of 50%. It maintains a MOS of 25%. If its annual fixed cost is Rs. 50 lakhs, calculate:

BE sales, MOS, Total Sales, Total Variable Cost and Profit

Q2. The following information is available from the records of Alpha Ltd. For the year 2019:

Assignment Q-2020

You are required to prepare a master budget.

Q3. You are a consultant hired to advise ABC Limited on ROI and help with decision making for additional order. The company has provided you following information:

Assignment q3-2020

The amount of division investment is Rs. 15,00,000 and the target rate of return on investment is 20%

 

  1. Based on the information provided calculate ROI and Residual income of ABC Limited
  2. Assume that division has offer to sell 50,000 units at Rs. 25 per unit. If additional order is accepted, the variable cost per unit will remain the same. However, fixed costs would increase by Rs. 250,000. A further additional investment of Rs. 10,00,000 would also be required. Analyze the impact on residual income.

April 2020 NMIMS

Q1. A Company is considering replacing one of existing machine with either a state of the art “Automatic Machine” which will reduce the labor cost by 80% or with a standard machine. The automatic machine will cost Rs. 2,50,000 with an estimated life of 5 year, whereas the standard machine will cost Rs. 2,00,000 with an estimated life of 8 year. Both machine have no residual value. Assume tax rate to be 40%.

The annual sales and costs are estimated as below:

The annual sales and costs are estimated as below

Calculate the payback period and advice the management

Q2. ABC Limited has provided following information related to sales, cost and margins for March 2020:

Calculate P/V ratio
Calculate P/V ratio

Calculate P/V ratio, Break-even Point (Sales), and Margin of Safety.

Q3. You have been hired as a consultant by an auto parts manufacturing company. The company is currently dealing with an issue with production of defective components costing them loss of customers and sales. Company has identified that the main issue lies with a component supplier. The company has already gathered some information but unable to make a decision.

You have been provided with this information, the company can purchase the components in question from two suppliers, existing supplier A or new Supplier B. The price quoted by Supplier A is ?18.00 per 100 numbers of the components and it is found that on an average 5% of the total receipt from this supplier is defective. The corresponding quotation from Supplier B is Rs. 15.00 per 100 numbers of the components but the defectives would go up to 10% for the total supply. If the defectives are not detected, they are utilized in production causing a damage of Rs. 18 per 100 components. The company intends to introduce a system of inspection for the components on receipt which would cost ?5.00 per 100 components. The new inspection system will be able to detect only 90% of the defective components received. No payment will be made for defective components in inspection. Assume total requirements of components to be 25,000 numbers. (Hint: Use total cost for your analysis and recommendation.

You are asked to advice company management on:
a. Whether inspection at the point of receipt is justified?
b. Which of the two suppliers should be asked to supply?