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Strategic Cost Management

1. A Factory produces 3 types of moulds. While producing, for switching over from one mould to another, there is a shift-over process involved. Costs incurred are as follows:

Shift-over costs Rs. 50,000
Factory Overheads Rs. 1, 00,000/-
Packing costs Rs. 20,000/-
Engineering Costs Rs. 30,000/-
Supervisor Costs Rs. 10,000/-
Quantity produced A- 1000, B – 2000, C- 4000

Allocate the costs to the 3 moulds (A,B and C) using Traditional Costing method and Activity Based Costing. Make assumptions as may be needed for cost drivers. Compare the results and discuss. (10 Marks)

2. What is Life Cycle Costing? Explain in brief. What are its Stages? Briefly explain each stage. What are the 4 stages of a Product Life Cycle?

For each of the following, mention the nature of cost incurred (Low, Medium, High) over each phase.

Research and Development
Sales Discounts
Maintenance and After Sales service
Advertisements (10 Marks)

3. a. Following are the Budgeted figures of PQR Ltd.
Particulars UoM
Raw Material Rs. Per Unit 50
Wages 10
Direct Expenses 20
Fixed Overheads Rs. 100000
Variable Overheads Rs. Per Unit 10
Selling & Distribution Expenses 3 20 % is Fixed
Administrative Expenses Rs. 50000
Sales Price Rs. Per unit 130

Capacity of the Factory is 10000 units. However due to Covid, the production capacity for the year was reduced to 80%.

Prepare a Budget for the factory in Normal and Covid situation. (5 Marks)

3. b. With the following information, prepare the Budgeted Profit for the year for Company XYZ.

UoM A B C
No. of Units Nos. 20 30 40
Sales Price Rs./Unit 100 50 25
Variable Costs Rs./Unit 40 20 5
Fixed Costs Rs. 1,80,000

Assuming that the mentioned production numbers are at 100% capacity, under what situation would XYZ ltd. create a flexible budget (suggest any one). What benefit would it provide to the management of the company? (5 Marks)

Nmims Unique Assignments contact
[email protected]
+91- 9503094040