Cost & Management Accounting NMIMS Assignment solution December 2020

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Cost & Management Accounting

Internal Assignment Applicable for December 2020 Examination

1. Excellent Clothing Company is run by Ms Dilnaz and her son, Burzin. They manufacture dresses for women and have diversified into the production of masks since April’20 to take advantage of the huge demand for masks due to the recent COVID-19 impact. Till now the decisions were taken on an adhoc basis by the promoters. However, given the phenomenal growth in business, they understand the importance of having formal processes in place.

You were hired as the Management accountant to enable them to formalize the decision making process in the company.

Please advise them regarding the significance and components of the following 3 key steps involved in Decision making process of a company:

a) Planning

b) Directing

c) Controlling (10 Marks)

2. Marginal Costing is a key tool used by Managements for Cost-Volume- Profit analysis enabling comparative assessment of 2 or more products / divisions. However, Absorption costing is the preferred method of accountants as it is a recognized and accepted practice for external reporting.

Please describe the differences between Marginal Costing and Absorption costing (Any 5). (10 Marks)

3.

WRITERS’ Company 
Writers’ Company produces 2 products presently 
The information related to manufacturing is given below. 
WRITERS’ CompanyYr 2018-19
Fountain PenBall point
Units1000020000
Area occupied (sq feet)70008000
Variable cost – Direct3225
Fixed Cost – Direct (per unit)108
Rent – Fixed Cost per month (Indirect – common for all products)3,00,000.00
The Fixed indirect cost of Rent of Rs 3,00,000/- is to be allocated to both the products
The company was doing this on the “number of units” basis till now.
  a. Please compute cost per unit of each product basis the above method.  
You have researched and advised Writers’ Company to have Activity Based Costing and have gathered data to support the allocation of the Fixed indirect cost as follows :
Break-up of Indirect Fixed CostsAllocation basis
Rent3,00,000Area of operations
(5 Marks)
  b. Please compute cost per unit of each product on the new method of allocation  
WRITERS’ Company
Writers’ Company produces 2 products presently
The information related to manufacturing is given below.
WRITERS’ CompanyYr 2018-19
Fountain PenBall point
Units1000020000
Area occupied (sq feet)70008000
Variable cost – Direct3225
Fixed Cost – Direct (per unit)108
Rent – Fixed Cost per month (Indirect – common for all products)3,00,000.00

( 5 Marks)

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