NMIMS Global Access
School for Continuing Education (NGA-SCE)
Course: Strategic Cost Management

Internal Assignment Applicable for December 2020 Examination

1. “Beautiful Masks“ is a start-up manufacturing designer masks for men and women
set up in April’ 20 post COVID.

It is managed by Ms Meher. She is facing a huge demand for her designer masks
from Retail outlets and on their Online store as well. She wants to understand the
correct approach for pricing the masks. She has appointed you as the management
accountant.
Please advise her regarding the key factors affecting pricing decisions, both internal
and external.
Also, suggest any 3 types of pricing methods she can choose from highlighting 2
salient features of each method.

(10 Marks)

2. Mr Chopra is the CEO of Tasty packaged Foods. They manufacture various products
like potato fries, samosas etc. Post covid, the company is under revenue pressure due
to the reduced demand for packaged food. Like every other business, the short term
decision making process in this business is also a process of selecting the best
amongst various alternatives considering the cost benefit factors and impact on
overall profitability of the firm. These could involve accepting or rejecting a special
order, making or buying decisions, product mix decisions etc. These decisions require
different analysis like Contribution margin analysis, relevant and irrelevant cost
analysis.
Please describe any 3 of these short term decision strategies with salient features.
(10 Marks)

3. Make vs Buy

Harish Aggarwal, A management accountant with Car Udyog is evaluating whether a
component MTR2000 should continue to be manufactured by Car or purchased from
Outside Vendor company. Outside Vendor has submitted a bid to manufacture and

supply the 32000 units of MTR 2000 that Car udyog will need for 2021 at a selling
price of Rs 173
Harish has gathered the following information regarding Car Udyog's costs to
manufacture 30000 units of MTR-2000 IN 2020

Direct Materials

19,50,000

Direct Manufacturing Labour

12,00,000

Plant space rental

8,40,000

Equipment leasing

3,60,000

Other manufacturing overhead

22,50,000

Total Manufacturing
costs

66,00,000
Harish has also collected the following information related to manufacturing
MTR 2000:
a. Prices of direct materials used in the production of MTR 2000 are expected to
increase by 8% in 2021
b. Car Udyog's direct manufacturing labour contract calls for a 5% increase in 2021
c. Car Udyog can withdraw from the plant space rental agreement without any
penalty. Car Udyog will have no need for this space if MTR 2000 is not
manufactured
d. The equipment lease can be terminated by paying Rs 60,000/-
e. 40% of the other manufacturing overhead is considered variable. Variable
overhead changes proportionately with the number of units produced. The fixed
component of other manufacturing overheads is expected to remain the same
whether or not MTR 2000 is manufactured

Required:
a. On the basis of the financial information Harish has obtained, calculate the cost of
making MTR 2000 inhouse in 2021 ? Please share calculations (5 Marks)

b. Please compare with the cost of outsourcing the product and whether it is profitable
to buy or manufacture MT 2000?