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

Internal Assignment Applicable for December 2020 Examination

1. Excellent Clothing Company is run by Ms Dilnaz and her son, Burzin. They
manufacture dresses for women and have diversified into the production of masks
since April’20 to take advantage of the huge demand for masks due to the recent

COVID-19 impact. Till now the decisions were taken on an adhoc basis by the
promoters. However, given the phenomenal growth in business, they understand the
importance of having formal processes in place.
You were hired as the Management accountant to enable them to formalize the
decision making process in the company.
Please advise them regarding the significance and components of the following 3 key
steps involved in Decision making process of a company:
a) Planning
b) Directing
c) Controlling

(10 Marks)

2. Marginal Costing is a key tool used by Managements for Cost-Volume- Profit
analysis enabling comparative assessment of 2 or more products / divisions.
However, Absorption costing is the preferred method of accountants as it is a
recognized and accepted practice for external reporting.
Please describe the differences between Marginal Costing and Absorption costing
(Any 5). (10 Marks)

3.
WRITERS' Company
Writers' Company produces 2 products presently
The information related to manufacturing is given
below.

WRITERS' Company Yr 2018-19
Fountain
Pen Ball point
Units 10000 20000
Area occupied (sq feet) 7000 8000
Variable cost – Direct 32 25
Fixed Cost - Direct (per
unit) 10 8
Rent - Fixed Cost per
month (Indirect - common
for all products)

3,00,000.00

The Fixed indirect cost of Rent of Rs 3,00,000/- is to be allocated to both the products
The company was doing this on the "number of units" basis till now.

a. Please compute cost per unit of each product basis the above method.
You have researched and advised Writers' Company to have Activity Based Costing
and have gathered data to support the allocation of the Fixed indirect cost as follows :
Break-up of Indirect Fixed Costs Allocation basis
Rent

3,00,000

Area of
operations
(5 Marks)

b. Please compute cost per unit of each product on the new method of allocation
WRITERS' Company
Writers' Company produces 2 products presently

The information related to manufacturing is given below.

WRITERS' Company Yr 2018-19

Fountain Pen Ball point
Units 10000 20000
Area occupied (sq feet) 7000 8000
Variable cost – Direct 32 25
Fixed Cost - Direct (per unit) 10 8

Rent - Fixed Cost per month (Indirect
- common for all products) 3,00,000.00

( 5 Marks)