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MBA(2012-14) - SEMESTER IV

ADVANCED MANAGEMENT ACCOUNTING - ASSIGNMENT 1 AND 2

Two excel files of Lists of cases with Roll Nos and Students Names hasbeen attached. Cases will be available in internet/ website or text books.

Preare one case stud! from each list and comlete the followin"#

$% &escribe the coman! and its business 'in brief%.(% )hat was the roblem faced b! the mana"ement*+% ,ow were the roblems solved* -ttach calculation/comutation

sheets and elaborate b! write u.% -nswer all the uestions / reuirements "iven in the case stud!.0% 1our observations2 comments2 criticism on Cost -ccountin"

Standards and conventions followed or no followedand

su""estions2 if an!.3% Presentation / PPT on the da! and date notified b! -cademics thruTime Table.

4% Soft co! to be mailed to Class Leader2 who will have to reare twosearate folders and save roll number5wise 'ascendin" order% and"ive to 6acult! on the last da!.

Submit xerox co! of the case2 rint out of assi"nment and rintout of PPTs'handouts 7 3 slides er a"e% after resentation. Plastic cover for bindin"or siral bindin" not reuired. 8ver! student will have to submit wo !"#e

#$d%e#.I&'or"nThis is an individual assi"nment and each student should selectdifferent cases as indicated to him / her for anal!sis and comlete theassi"nment. 9f two or more students select the same case2 "rade will not beawarded to an! student.

:uidelines for PPT will be mailed 'PPT on PPT%. ;! exerience was thatPPTs were not at all u to the mark as exected in

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full!5written off but would robabl! fetch J0G. There will2 however2 be redundanc!costs which he estimated at J0>k.M

."$l B$rn# /%n"n!%"l Conroller figures in '000.rod$!

.rod$!

To"l

Sales

$>>G Hnits at $0/unit $0>>

I>G Hnits at (0/unit (>>>

$(>G Hnits at $>/unit +0>>

;aterials +>> >> 4>>

Labor 4>> I>> $0>>

Averheads ((0 +3> $0> 4+0

$((0 $03> $0> (@+0

Redundanc! Cost 0>

:ain on Sale of Scra 0

Profit/'Loss% 25 440 520

9n this case the rofit has increased and tar"et Profit of >>k is achieved so as to have a(>K return on caital. 9n this case both roblems has been resolved.

Bo Berr8 e M"r9e%n: &"n":er2 roosed to reduce the rice b! $ er unit whichwould increase demand b! (0K. ,e asked Production ;ana"er to control the variable

cost b! $ er unit. The forecasted estimates are shown below.

Bo Berr - M"r9e%n: M"n":er figures in '000

.rod$!

.rod$!

.rod$!

3

To"l

Sales

$>>G Hnits at $0/unit $0>>

I>G Hnits at (0/unit (>>>

150; Un%# " I0>

;aterials +>> >> I> $$I>

Labor 4>> I>> 40> ((0>

Averheads ((0 +3> ++> @$0

Co# Red$!%on 150

$((0 $03> $$> $@0

Profit/'Loss% 25 440 (70) 755

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,ere the first roblem is "ettin" resolved but still the second roblem ersists2 i.e.Product D is still makin" losses.

Ar$r M%!ell8 .rod$!%on M"n":era"reed to reduce labor fixed costs b! J40k but

increase the variable overhead element b! $>K. ,e also roosed to substitute a cheaercomonent for D which would save 40 cents er unit. The forecasted estimates areshown below.

Ar$r M%!ell - .rod$!%on M"n":er figures in '000

.rod$!

.rod$!

.rod$!

3

To"l

Sales

$>>G Hnits at $0/unit $0>>

I>G Hnits at (0/unit (>>>

$(>G Hnits at $>/unit $(>> 4>>

;aterials +>> >> I> $$I>Labor 4>> I>> 340 ($40

Averheads ((0 +3> 64> @++

Savin"s $$+ $@I

Profit/'Loss% 25 440 (216) 502

,ere also the first roblem is resolved but still second roblem ersists. Product D is stillunrofitable.

Re!o&&end"%on#

9 would su""est that the mana"ement should "o with the solution roosed b! BoBerr8 e M"r9e%n: &"n":er "# " #ol$%on %# &"?%&%@%n: e 'rof%#+ 9f theroduction deartment is further able to control the variable cost b! $ er unit2 ProductD will also become rofitable.

Ad"n":e# of M"r:%n"l Co#%n: Meod

Comonents and sare arts ma! be made in the factor! instead of bu!in" from themarket. 9n such cases2 the mar"inal cost of manufacturin" the comonents or sare arts

should be comared with market rice while takin" decision Oto make or bu!. 9f

mar"inal cost is lower than the market rice2 it is more rofitable to make than

urchasin" from market. -dditional or secific fixed cost ma! be a relevant cost.

6ollowin" are the advanta"es of ;ar"inal Costin"#

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Qariable cost remains constant er unit of outut and fixed costs remain constant

in total durin" short eriod. Thus control over costs becomes more effective and

easier. Standards can be set for variable costs2 while Eud"ets can be established

for fixed cost in order to exercise full control over the total activities.

;ar"inal costin" brin"s out contribution or rofit mar"in er unit of outut2 and

clearl! brin"s out the effect of chan"e in activit!. 9t facilitates makin" olic!

decisions in a number of mana"ement roblems2 such as determinin" rofitabilit!

of roducts2 introducin" a new roduct2 discontinuin" a roduct2 fixin" sellin"

rice2 decidin" whether to make or bu!2 utiliin" sare caacit!2 rofit5lannin"2

etc.

The distinction between roduct cost and eriod cost hels eas! understandin" of

mar"inal cost statements.

Closin" inventor! of work5in5ro"ress and finished "oods are valued at mar"inalor variable cost onl!. This method leads to "reater accurac! in arrivin" at rofit

as it eliminates an! carr!5over of fixed costs of the revious eriod throu"h

inventor! valuation.

-s a corollar! to above2 since fixed costs do not enter into roduct5cost2 it

eliminates the rocess of allocatin"2 aortionin" and absorbin" overheads2 and

adustin" under and over5absorbed overheads. Therefore2 the method is simler

to oerate.

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