Illllllil !lll t!! !Mtt!!!!!t!
t taI
i ll|ilil ilil ilt riilt iliti ilt iitt
3
oP - 257
lV Semester M.Com. Examination, Irlovember 2021
{cBcs)
COMMEHCE
AT 4.3 : Strategic Cost Management ;
Time :3 Hours
;
t13
SECTION _ A o
"!. Answer any seven of the foliowing sub-questions
in about
Each sub-question carries two marks. {7x2=141
a) Define TQM.
b) Differentiate betureen experiencc curve and learning curve.
c) Give the meaning of goal congruence.
d) What do you mean by opportunity cost pricing ?
e) List out the Balanced Scorecard perspectives.
f) What do you mean by Benchmarking ?
g) What are the phases of learning curve ?
h) Give the meaning of PFiAISE.
i) What do you mean by prevention cost ?
j) What do you mean by target rate of return pricing ?
SECTION -B
Answer any four of the following in about one page. Each question carries
' .'|---
fivemarks. (4x5=20)
2. Define Benchmarking. Briefly explain the different types of Benchmarking.
3. "The learning curve will pass through three different phases". Discuss.
4. Briefly explain the benefits of Balanced Scorecard.
P.T.O.
OP - 257 '2- I llllllil lilll H lffi I ffi I llll llll
5. A company is organized into two divisions namely A and B produces three
products K, L and M. Data Per unit are :
Particulars K L M
Market priee (Bs.i fia 115 100
Variable costs (Rs.) B4
t
60 7A
Direct labour hours 4 53
Maximum sales Potential (units) 1,600 1,000 600
Division B has demand for 600 units of product L for its use. lf division A cannot
supply the requirement, division B can buy a similar product from malket at Rs.1 12
per'rnit. What should be the transfer price of 600 units of L for division B, if the
iotal direct labour hours available in division A are restricted to 15,000 ?
6. A company has furnished the following cost data:
Direct materials Rs. 11.20 per unit
Direct wages Rs. 3.00 per unit
Variable overheads Rs. 0.80 per unit
Fixed factory overheads Rs. 6,60,000 P.a.
Fixed selling and administration overheads Rs. 3,60,000 p.a.
Annual sales 4,00,000 units
Capital employed':in fixed assets Fls. 9,00,000
Capital employed in current assets 50% of sales. Determine the selling price
per unit to yield 207" return on capital employed.
T. Acompany wants to manufacture a new product against order. The initialtrails
showed that the first unit would take 10 hours at Rs. 15 per hour and that the
operations would be subject to a iearning of 80%. The cost of materiais per
unit is Rs. 200 and overheads amount lo 15h of labour cost. The first order
received is for eight units of the product. What price should the firm quote to
get a margin of 20% on sales ?
SECTION _ C
Answer any three of the following. Eaeh question carries tweive marks. i3x12=36)
8. Briefly explain the Benchmarking process.
g. Enunrerate the critical success factors required for successful implementation
of TQM.
I ltt!Iui llll! u, rllli l[!! ll!l !lll
i ill
llflllli lilll ill lllll ltiil lil aP - 257
10. Diya and Company has two divisions. South division manufactures an
intermediate product for which there is no intermediate external market. North
division incorporates this intermediate product into a final product which it
sells. One unit of the intermediate product is used in the production of the final
product, which North division estimates it can qell at various seiling prices are
as follows . r
Net selling price
Quantity sold (units)
(RsJ
1,ooo
90 2,000
g0 3,000
7A 4,000
60 5,000
50 6,000
The costs of eaeh division are as fotlows.
South North
Variable cost per unit (Rs.) 11 7
Fixed cost per annum (Rs.) 60,000 90,000
The transfer price is Rs. 35 for the lntermediate product and is determined on
full cost plus basis.
You are required to :
a) Prepare profit statements for each division and the company as a whole for
the various selling prices.
b) State which selling price maximises the profit of North division and the
company as a whole and comment on why the latter selling price is not
selebted by North division.
c) State which transfer pricing policy will maximise the company's profit under
divisional organisation.
11. A manufacturer has three products A, B and C. Currently sales, cost and selling
price details and processing time requirements are as follows :
Particulars i'
Product Product Product
ABC
Annual sales (units) 6,000 6,000 750
Selling price (Rs.) 20 31 39
; Unit cost (Rs.) 18 24 30
Processing time required per unit (hours) 1 1 2
The firm is working at full capacity (13,500 processing hours per year).
Fixed manufacturing overheads are absorbed into unit costs by a charge of
2AO% variable costs. This procedure fully absorbs the fixed manufacturing
overhead.
I It!!t!!r r!rr iit flilt !!l!t Ilul!
ap - 2s7 ilililililHHililrililr[ilIil!
Assuming that :
a) Processing time can be switched from one product line to another
b) The demand at current selling price is
Product A B
Product Produqt C
1 1000 units 8000 units 2000 units
c) The selling prices are not to be altered
You are required to calculate, the best production programme for the next
operaling period and to indicate the increase in net pro{it that this should yield.
ln addition identify the shadow price of a processing hour.
12. Acompany currently operating at 80% capacity, shows the following profit and
loss account.
Rs. Rs"
Sales 3,20,000
Costs : Direct material 1,00,000
Direct labour 40,000
Variable overhead 20,000
Fixed overhead 1,30,000 2,90,000
Profit 30,000
It has received an offer of an overseas order that would require the use of the
half the factory capacity. The order, which must be taken in full or rejected
completely. Must be supplied at a price 10% below current domestic prices.
Management is in a dllemma.
They can either :
a) Reject the order and carry on witfr home sales only as currently (or)
b) Accept the order, split the capacity equally between overseas and home
sales, and turn away excess home demand (or)
c) lncrease factory eapaeity so that they can accept the order by maintaining
the present home sales, by buying machine that will increase factory capacity
by 10% and fixed cost by Rs. 20,000 and work ovefiime at time and half to
meet balance to required capacity. Advise the company.
