Assignment Sample Solution: Strategic Cost Management December 2023
NMIM$ Global Access
School for Continuing Education (NGA-SCE)
Course: Strategic Cost Management December 2023
Internal Assignment Applicable for June 2023 Examination
1. Shubham Limited is in the business of Fashion Designing. It has received an order to deliver 25,000 jackets custom made for ABC Ltd. The cost estimates for producing the jackets is as under:
a) Cloth 2500 reams of cloth @ Rs. 4000/- per ream
b) Threads and other decoration total Rs. 12,50,000/-
c) Labour rate Rs. 500 per hour. Total hours required is 5000 hours
d) Factory overheads Rs. 8,00,000/-
e) Selling expenses (including delivery charges) Rs. 75,000/-
Quote a price per jacket on the following basis: 1. Cost Plus 10% margin on cost 2. Variable cost + 20% margin 3. Target profit of Rs. 200 per jacket. Calculate the PV Ratio at that price. 4. Shubham Limited has a good brand following and people are willing to give up to Rs. 2500 per jacket. Shubham prices it at Rs. 2400 per jacket. What is this strategy called? (10 Marks)
2. M/s Priya Industries is in the business of manufacturing and selling lubricants. There are 4 types of products.
The information available about each: P1 P2 P3 P4
Total No. of units produced 1300 2000 1500 1200 6000
Labour Hours 250 350 200 200 1000
No. of units in 1 packet 2 5 3 3 13
Machine Hours 260 450 360 180 1250
The total cost incurred is as under: Fixed Costs Rs. Salaries and Wages 2500000
Supervisor Cost 75000
Factory Overheads 1000000
Packaging costs 600000
Total Costs 4175000
It is assumed that the supervisor spends time in proportion of No. of units produced. Calculate the cost of each unit of the products under: a) Traditional Costing b) ABC Costing (10 Marks)
Q3. a) With the following information, prepare the Budgeted Profit for the year for Company XYZ. (5 marks)
4 products (P, Q, R & S) are produced by XYZ Ltd. The labour costs are at Rs. 10 per hour of work. Raw Material used for all products is similar at Rs. 25 per kg. Factory Rent is Rs. 1,00,000 and other Overheads are at Rs. 20,000/-. Prepare a Budgeted Profit and Loss Statement for XYZ Ltd. Other information is as under: UoM P Q R S No. of Units produced Nos. 50 45 80 90 Sales Price Rs. Per Unit 700 700 900 950 Labour Hours Hrs. per unit 10 12 8 4 Raw Material Kgs. per unit 6 5 10 12
b) The following is the Profit or Loss statement of SRT & Co. (5 marks) Sales 25000 @ Rs. 50 p.u. 1250000 Variable Cost Raw Material 250000 Labour 345000 Variable Overheads 150000 Fixed Costs 400000 Profit 105000 Calculate: a) Contribution per unit b) PV Ratio c) No. of units to be sold for earning profit of Rs. 70,000/- ***************
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