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Cost And Management
Accounting
- “Management
accounting is a mid-way between financial and cost accounting.” Elucidate.
- What is the major
revenue recognition criterion?
- What is a trading
account? What are its major constituents? What is its major outcome?
- The cash flow
statement is as useful to shareholders and lenders as to management.
Explain.
- (a) “All future
costs are relevant.” Do you agree? Why?
(b) “Fixed costs are
really variable. The more you produce the less they become.”
Do you agree? Explain.
- In connection with
inventory ordering and control, certain terms are basic. Explain the
meaning of each of the following:
- Economic
order quantity
- Re-order
point
- Lead
time
- Safety
stock
- What is meant by
under/over-absorption of factory overheads? How will you account for them
in cost accounts? Does it bear any impact while submitting quotations?
- A manufacturing
company operating a system of budgetary control finds that their
production capacity during the year varies between 75 per cent and 90 per
cent as against the budgeted capacity of 80 per cent for the year. It has
been suggested that a system budgets should be introduced to effectively
control costs. Outline the steps you would take to implement this
suggestion keeping in mind that the management would still require
periodic comparison with their overall budget during the year.
- “Transfer prices
must always be equal to externally determined market of comparative
products or services.” Comment fully.
- Suppose a firm is considering replacing
an old machine with a new one. The firm does not anticipate that any new
revenues will be created by the replacement since demand for the product
generation by both the machines is the same. However, in the CFAT work
sheet used in evaluating the proposal, the analyst shows positive CFBT in
the operating cash flow section. What creates operating CFBT in this
situation?
COST ACCOUNTING MANAGEMENT
CASE STUDY : 1
Materials X and Y are used
as follows :
Minimum usage — 50 units
each per week
Minimum usage — 150 units each
per week
Normal usage — 100 units
each per week
Ordering quantities x = 600
units
Y = 1000 units
Delivery period x = 4 to 6
weeks
Y = 2 to 4 weeks
Calculate for each material
a) Minimum level
b) Maximum level
c) Order level
d) Explain importance of inventory
controls?
CASE STUDY : 2
Question :
1) You are required to
arrive at a selling price so as to give the same percentage of
profit on increased cost of
sales, as before.
2) Prepare a statement of
profit / loss per unit, showing the new selling price and cost
per unit in support of your
answer.
3) What is the anticipated
amount of increased material and labour cost.
4) What policy changes
should the company make for maintaining the profits.
CASE STUDY : 3
A product passes through
two processes. The output of process, I becomes the input of
process II and the output
of process II is transferred to wearhouse. The quantity of raw
materials introduced into
process I is 20000 Kg at Rs 10 per kg. The cost and output
data for the month under
review are as under.
Process I Process II
Direct Materials (Rs)
60,000 40,000
Direct Labour (Rs) 40,000
30,000
Production overheads (Rs)
39,000 40,250
Normal loss 8 5
Output 18000 17400
Loss realization of Re/unit
2.00 3.00
The company’s policy is to
fix the selling price of end product is such a way as to
yield a profit of 20% on
selling price.
Required :
1) Prepare the process
account
2) Determine the selling
price per unit of the end product.
3) What are the advantages
for preparation of an process account?
4) What is the output of
Process I and Process II?
CASE STUDY : 4
A factory manufactures a
chemical product with three ingredient chemicals A, B
and C as per standard data
given below.
Chemical Percentage of
total input Standard Cost per Kg
A 50% 40
B 30 60
C 20 95
There is a process loss of
5% during the course of manufacture.
The management gives the
following details for a certain week.
Chemical consumed Quantity
Purchased Actual Cost
& issued (Rs)
A 5200 Kg 2,34,000
B 3600 Kg 2,19,600
C 1700 Kg 1,58,100
Output of finished product
: 10200 Kg
Calculate all the relevant
variances
a) Total material cost
variances
b) Material price variance
c) Material mix variance
d) Yield variance
e) Usage variance &
give the chart Standard cost of a Chemical product
COST & MANAGEMENT ACCOUNTING
CASE STUDY : 1
J
P Ltd manufacturers of a special product, follows the policy of EOQ for one of
its components. The components’s details are as follows.
Purchase
price per component, Rs 200
Cost
of an order Rs 100
Annual
cost of carrying one unit in inventory,
10
per cent of purchase price
Annual
usage of components, 4000
The
company has been offered a discount of 2 per cent on the price of the component
provided the lot size is 2000 components at a time.
Q2) Advise whether the quantity discount offer can be
accepted (assume that the inventory carrying cost does not vary according to
discount policy).
Q3) Would your advise differ if the company is offered 5 per
cent discount on a single order?
Q4) Explain the term EOQ?
CASE STUDY : 2
In an engineering concern, the employees are paid incentive
bonus in addition to their normal wages at hourly rates. Incentive bonus is
calculated in proportion of time taken to time allowed, of the time saved. The
following details are made available in respect of employees X, Y & Z for a
particular week.
Q1) You are required to work out for each employee the
amount of bonus earned?
Q2) Explain the term incentive?
Q3) You are required to work out for each employee the total
amount of wages received?
Q4) You are required to work out for each employee the total
wages cost per 100 units of output?
Q2) Explain the term incentive?
CASE STUDY : 3
Following particulars have been extracted from the books of
Supreme Engineers Ltd.
Q1) You are required to compute the quantum of wages under
Halsey Scheme and Rowon Scheme?
Q2) Which of these schemes would you like to introduce in
this company if the time taken to complete the job is likely to reduce to 6
hours after three months.
Q3) An alternative method of payment by results by a
straight piece work rate for completion of the job in 7 hours is feasible.
Would you like to switch over to this method of payment given further that
hourly rate would be reckoned at Rs 1.50 for fixation of the price rate?
Q4) Give reasons for your advice?
CASE STUDY : 4
The soft flow Ink Ltd’s income statement for the preceding
year is presented below. Expect as noted the cost / revenue relationship for
the coming year is expected to follow the same pattern as in the preceding
year. Income statement for the year ending March 31 is as follows.
Q1) What is the break-even point in account and units?
Q2) Suppose that a plant expansion will add Rs 50,000 to
fixed costs and increase capacity by 60 per cent. How many bottles would have
to be sold after the addition to break even?
Q3) At what level of sales will the company be able to
maintain its present pre-tax profit provision even after expansion?
Q4) Suppose the plant operates at full capacity after the
expansion, what profit will be earned?
WE PROVIDE CASE STUDY ANSWERS, ASSIGNMENT SOLUTIONS, PROJECT REPORTS AND THESIS
ARAVIND - 09901366442 – 09902787224
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