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NMIMS Global Access

School for Continuing Education (NGA-SCE) 

Course: Strategic Cost Management

Internal Assignment Applicable for June 2020 Examination

Assignment Marks: 30 Instructions:

Instructions :-

•  All Questions carry equal marks.
• All Questions are compulsory
• All answers to be explained in not more than 1000 words for question 1 and 2 and for question 3 in not more than 500 words for each subsection. Use relevant examples, illustrations as far as possible.
•  All answers to be written individually. Discussion and group work is not advisable.
• Students are free to refer to any books/reference material/website/internet for attempting their assignments, but are not allowed to copy the matter as it is from the source of reference.
• Students should write the assignment in their own words. Copying of assignments from other students is not allowed
• Students should follow the following parameter for answering the assignment questions

1. 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 (10 marks)
    
2. The following information is available from the records of Alpha Ltd. For the year 2019:
    

   	Rs.
   Sales of product A	25.0 Lakhs
   Sales of product B	75.0 Lakh
   Material cost	55% of sales
   Direct wages	50,000 per month per worker

   
   
   Factory Overheads:
    

   Indirect Labor
   Works Manager	10,000.0 per month
   Foreman	5,000.0 per month
   Stores and spares	5.0% of sales
   Depreciation of machinery	150,000.0
   Light and power	100,000.0
   Repairs and maintenance	150,000.0
   Administration expenses	200,000.0 per annum

   
   You are required to prepare a master budget. (10 marks)
    
3. 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:

   Particulars		Amount (Rs.)
   Sales (2,00,000 units at Rs. 20)	4,000,000
   Less: Variable costs @ Rs. 15 per unit	3,000,000
   Contribution Margin	1,000,000
   Less: Fixed costs	750,000
   Division Profit	250,000

   
   The amount of division investment is Rs. 15,00,000 and the target rate of return on investment is 20%
   
   a) Based on the information provided calculate ROI and Residual income of ABC Limited (5 marks)
   
   b) 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. (5 marks)