COST Management Test Questions & Suggested Solutions
by L. Muralidharan, FCA., Grad. CWA.,
COST MANAGEMENT - TEST QUESTIONS & SOLUTIONS
Question: 1 Bharata Ltd is considering proposals for design changes in one of a range of soft toys. The proposals are as follows: (a) Eliminate some of the decorative stitching from the toy. (b) Use plastic eyes instead of glass eyes in the toys (two eyes per toy). (c) Change the filling material used. It is proposed that scrap fabric left over from the body manufacture be used instead of the synthetic material which is currently used. The design change proposals have been considered by the management team and the following information has been gathered: (a) Plastic eyes will cost Rs.15 per hundred whereas the existing glass eyes cost Rs.20 per hundred. The plastic eyes will be more liable to damage on insertion into the toy. It is estimated that scrap plastic eyes will be 10% of the quantity issued from stores as compared to 5% of issues of glass eyes at present. (b) The synthetic filling material costs Rs.80 per tonne. One tonne of filling is sufficient for 2,000 soft toys. (c) Scrap fabric to be used as filling material will need to be cut into smaller pieces before as and this will cost Rs.0.05 per soft toy. There is sufficient scrap fabric for the purpose. (d) The elimination of the decorative stitching is expected to reduce the appeal of the product, with an estimated fall in sales by 10% from the current level. It is not felt that the change in eyes or filling material will adversely affect sales volume. The elimination of the stitching will reduce production costs by Rs.0.60 per soft toy. (e) The current sales level of the soft toy is 3,00,000 units per annum. Apportioned fixed costs per annum are Rs.4,50,000. The net profit per soft toy at the current sales level is Rs.3. Required: (i) Using the information given in the question, prepare an analysis which shows the estimated effect on annual profit if all three proposals are implemented, and which enables management to check whether each proposal will achieve an annual target profit increase of Rs.25,000. The proposals for plastic eyes and the use of scrap fabric should be evaluated after the stitching elimination proposal has been evaluated. (ii) Calculate the percentage reduction in sales due to the stitching elimination at which the implementation of all three design change proposals would result in the same total profit from the toy as that earned before the implementation of the changes in design. Question:2 ABC Ltd manufactures a simple garden tool. At present the company is working at full capacity producing the three components A,B,C one of each being required for the assembly of the tool. All the machines are capable of making all the components. Current cost data concerning and hundred tools are as follows: Machine Hours 10 16 20 46 Variable Cost Rs. 26 32 32 42 142 Fixed Cost Rs. 10 2 32 22 76 Total Rs. 36 44 64 74 218 250
Components - A Components - B Components - C Assembly Selling Price
The management is engaged in preparing next year's budget an increase in sales is to be provided for. The factory already has to work at full machine capacity to meet current demand and no increase in the present machine capacity can be effected for over 12 months. Though facilities involving variable costs can be increase data very short notice. It is decided that one of the components will have to be bought out. The following quotations have been received: L. Muralidharan, FCA., Grad. CWA., 1 Sreeram Coaching Point
COST MANAGEMENT - TEST QUESTIONS & SOLUTIONS
Components A B C Price per 100 tools Price per 100 tools Price per 100 tools Rs 36 46 54
The Sales manager feels sure that he can sell at least 50% more tools than at present and probably 75% more provided the factory capacity is available. You are required to prepare a report for management giving your recommendations as to which...
MODULE - 1
1. Explain the following terms: (DEC, 2010)
1. Direct Cost
2. Indirect Cost
3. Cost Object
4. Cost Driver
5. Cost Allocation
6. Cost Sheet
7. Semi variable cost
2. Write a detailed note on Target Costing. (DEC, 2010)
3. Write a note on methods of absorption of overheads. (DEC, 2010)
4. Write a note on classification of overheads. (DEC, 2010)
5. Write short notes on the following: i. Product Costs ii. Period costs iii. Out of pocket cost iv. Sunk Costs v. Opportunity cost vi. Replacement cost vii. Joint cost (DEC, 2011)
6. Explain the advantages of and objections against Cost Accounting (DEC, 2011)
7. Briefly explain suitability, merits and demerits of the following methods of absorption of overheads:
i.) Percentage of direct material cost
ii) Percentage of direct labor cost (DEC, 2011)
8. Explain the difference between the cost accountancy, costing and cost accounting. (MAY, 2010)
9. Elaborate in detail the methodology to be adopted for departmentalization of overhead expenses. How the activity based apportionment helps the organization to achieve the much precise level of cost compilation? Elaborate in...
...does not have to spend time analyzing the entire package thus improving network latency or bottlenecks. Due to its multi protocol capabilities MPLS can be integrated with different networking technologies from ATM to native IP environments; in addition, this multi protocol capability also provides a way to converge different types of traffic such as data, voice and video onto one network. MPLS technology also provides some other advantageous features like Traffic Engineering (TE), VPN, Any Transport over MPLS (AToM) and Quality of Service (QoS). This paper will help provide an understanding of how MPLS works and the QoS capabilities it can provide.
History of MPLS
In 1996 a group from Ipsilon Networks introduced a “flow management protocol”, this technology only worked with ATM transmissions and did not become very popular in the market. Not long after Cisco Systems proposed a similar technology called “Tag Switching” that was not restricted to ATM transmissions; at first this technology was proprietary to Cisco. Cisco renamed the technology to “Label Switching” and gave it to the Internet Engineering Task Force (IETF) for open standardization. The IETF worked on the technology and in 1999 MPLS was introduced to the world.
Introduction to MPLS
Multi Protocol Label Switching (MPLS) is a networking technology that functions between layer 2 (Data Link Layer) and layer 3 (Network Layer) of the OSI model. In some instances MPLS is said to...
Week 8: Cost Accounting and Management Decisions
Leah M. Pasternak
Professor Bryan Womack
December 1, 2013
Cost Accounting and Management Decisions
A unique and innovative manufacturing company
It all started with an incandescent light bulb and from there, rocketed into one of the most successful, world-renowned company in the world. Thomas Alva Edison first established Edison General Electric Company in 1890 (General Electric, 2013). Two years later, another electrical competitor, the Thomson-Houston Company, merged with Edison General Electric to become the General Electric Company we now know today (General Electric, 2013). Manufacturing innovators in so many various products ranging from lighting to transportation, the General Electric Company has withstood over a century of economic trends, and is by far, one of the most important manufacturing companies in the world. Some of the primary and well-known products manufactured by the General Electric Company are GE appliances and large jet aircraft engines.
Variable and fixed cost structures and what they mean to GE managers.
General Electric uses simple and competitive cost structures as one of their main strategies which has proven to be extremely effective within their company, and has enabled them to withstand years of changing economies. Management...
...Chapter 01 - CostManagement and Strategy
CostManagement and Strategy
Multiple Choice Questions
1. Which of the following does not represent a main focus of costmanagement information?
A. Strategic management.
B. Performance measurement.
C. Planning and decision making.
D. Preparation of financial statements.
E. Internal auditing and control.
2. Strategic management can be defined as the development of a sustainable:
A. Chain of command.
B. Competitive position.
C. Cash flow.
D. Business entity.
E. Company image.
3. Costmanagement has moved from a traditional role of product costing and operational
control to a broader strategic focus, which places an emphasis on:
A. Competitive pricing.
B. Domestic marketing.
C. Short-term thinking.
D. Strategic thinking.
E. Independent judgment.
4. All of the following are examples of total quality management practices except:
A. Redesign of a product to reduce its parts by 50 percent.
B. Reduction in the movement required in a manufacturing job.
C. Separating the sales and services functions.
D. Raising raw material quality standards.
E. Cross-training assembly line workers to cover sick leave absences.
Chapter 01 - CostManagement and Strategy
5. In a local factory, employees...
1. Explain the steps in Human Resource Planning.
Company Objectives & strategic plans
Market forecast Production Objectives/Process Capital/Financial Plans
Time Horizon (Short/Long term) PHASE 1
HR Demand Forecast Norms Number category Skills----- Estimating HR Requirements based on objectives & top management approval----- HR Inventory HR supply forecast PHASE II
ACTION PLANS PHASE III
Monitoring & Control
1. Demand Forecasting
2. Supply forecasting
3. Determining Human resource Requirements
4. Action Planning
5. Monitoring & Control
6. What makes career planning a success? Explain.
What is most needed to make career planning a reality & success is strong & unflinching conviction of the top management in career planning & their ability to permeate their enthusiasm down below. The path may be trying, but once determined steps have been taken, the success...
1. What is operations management and how is different from operations research?
Operations Management is the set of activities that creates value in the form of goods and services by transforming inputs into outputs. The operations management of any organization involves the design, operation, and improvement of the systems that create and deliver the primary products and services of
the organization. From an organizational point of view, operations management might be defined as the management of the direct resources that are required to produce and deliver organizational goods and services. Operations management is an area of business that is concerned with the production of goods and services. Operations research is an interdisciplinary mathematical science that focuses on the effective use of technology by organizations.
2. What are the major factors leading to the resurgence of interest in OM today?
OM is relatively new field of research and still evolving, many businesses employ it is a way to increase productivity and reduce error. OM allows companies to be more competitive by reducing unnecessary cost involved when resources are squandered. Today the human being is constantly finding new ways to get more for less. This means an increase in productivity, or output/input. OM helps to find these ways of increasing productivity through innovations. Technological...
...MGT 320 Opening Exercises
1. Marbury v. Madison established:
a. Judicial review
2. Which of the following is not a primary source of law?
a. Journal articles
3. All of the following are different theories of jurisprudence except:
a. The Uniform Commercial Code
4. Litigation is imperative in cases involving business dealing to establish all of the following except:
a. Moral conduct
5. ______ refers to the various administrative bureaucracies in government, sometimes termed the unofficial “fourth branch of government”
a. administrative law
1. The U.S. Constitution created the structure of the federal government to include which of the following branches?
a. Executive, legislative, judicial
2. A party’s “bottom line” in a negotiation is known as a _______.
a. Reservation point
3. _____ is the study of standards of business behavior that promote human welfare and the common good.
a. Business ethics
4. Which of the following is NOT a common method of alternative dispute resolution?
5. Federalism refers to ______.
a. The division and sharing of power between state and federal governments
1. Under the ______ doctrine, workers in the United States are free to work for whomever they want to, and employers are free to hire whomever they want to, and fire them at will.
2. What is the most common form of doing business in the United States?
a. Sole proprietorship
3. Which of the following is the most important federal civil...
(Chapter 4, 5, 6)
ID : __________________________
1. A business plan is a written document that serves as a blueprint and guide for a proposed business project.
2. Lack of commitment and dedication is one of the pitfalls in preparing business plan.
3. The cover letter is often enclosed with the completed business plan as an introduction to the purpose and contents of attached plan.
4. Manpower planning section is part of schedule of tasks and responsibility.
5. Market size is the target customer group that can be identified through a market segmentation process.
6. Marketing strategies are only formulated based on the product to be offered, the price to be charged and the distribution required to achieve and forecasted sales.
7. The operations overhead encompass water, electricity, telephone and gas facilities as well as other basic utilities that are essential in moving the operations.
8. According to SMIDEC, a medium sized business is a business establishment with an annual sales turnover of between RM 10 million and RM 20 million and which employ not more than 150 full time workers.
9. Big company has more flexibility to adapt to changes in the environment due its size and structure.
10. Method of operation or production process is considered as ‘materials input’ in transformation process.
11. A good business objective should be specific, measurable, achievable, consistency, and...