NMIMS Global Access
School for Continuing Education (NGA‐SCE)
Course: Strategic Cost Management
Internal Assignment Applicable for September 2016 Examination
Assignment Marks: 30
Instructions:
All Questions carry equal marks.
All Questions are compulsory
All answers to be explained in not more than 1000 words for question 1 and 2 and for
question 3 in not more than 500 words for each subsection. Use relevant examples,
illustrations as far as possible.
All answers to be written individually. Discussion and group work is not advisable.
Students are free to refer to any books/reference material/website/internet for attempting
their assignments, but are not allowed to copy the matter as it is from the source of
reference.
Students should write the assignment in their own words. Copying of assignments from
other students is not allowed
Question 1 (10 Marks)
The Board of Directors of CP Ltd. is considering Investment in a project having a life of 5 years.
The project is based in an upcoming Asian country. Forecast financial data is as follows:
(Rs. Million)
Year 0 1 2 3 4 5
Fixed Assets (500)
Working
Capital (50) Revenue
NMIMS Global Access
School for Continuing Education (NGA‐SCE)
Course: Strategic Cost Management
Internal Assignment Applicable for September 2016 Examination
370 500 510 515 475
Costs 300 325 335 330 325
Finance
charges 15 15 15 15 15
Depreciation 100 100 100 100 100
Profit before
tax (45) 60 60 70 35
The applicable tax rate is 33%. The company’s cost of capital is 12% and the target accounting
rate of return is 25%. The initial investment has no salvage value. The working capital is
expected to be liquidated at the end of the life at its book value.
Compute the NPV and advice the management if the investment should to be undertaken.
Question 2 (10 Marks)
During a recent Management meeting, a newly recruited cost trainee referred to ‘Cost Benefit
Analysis’. To team got excited and asked the trainee to briefly explain what are the benefits &
criticism of Cost Benefit Analysis.
You being the new cost trainee is expected to discuss what ‘Cost Benefit Analysis’ is.
Question 3
(a) The present management team of Sumo Ltd is not happy with the traditional costing
system and have asked you as a Management Accountant to evaluate Activity Based
NMIMS Global Access
School for Continuing Education (NGA‐SCE)
Course: Strategic Cost Management
Internal Assignment Applicable for September 2016 Examination
Costing. Please run the management team through the various steps involved in Activity
Based Cost allocation. (5 Marks)
(b) A new start up is evaluating launching its product in the market. They have appointed a
consultant and are interested in understanding the concept of ‘Product Life Cycle’. You
being the lead consultant, are required to take the management team through a brief
explanation of the same. (5 Marks)
******************
School for Continuing Education (NGA‐SCE)
Course: Strategic Cost Management
Internal Assignment Applicable for September 2016 Examination
Assignment Marks: 30
Instructions:
All Questions carry equal marks.
All Questions are compulsory
All answers to be explained in not more than 1000 words for question 1 and 2 and for
question 3 in not more than 500 words for each subsection. Use relevant examples,
illustrations as far as possible.
All answers to be written individually. Discussion and group work is not advisable.
Students are free to refer to any books/reference material/website/internet for attempting
their assignments, but are not allowed to copy the matter as it is from the source of
reference.
Students should write the assignment in their own words. Copying of assignments from
other students is not allowed
Question 1 (10 Marks)
The Board of Directors of CP Ltd. is considering Investment in a project having a life of 5 years.
The project is based in an upcoming Asian country. Forecast financial data is as follows:
(Rs. Million)
Year 0 1 2 3 4 5
Fixed Assets (500)
Working
Capital (50) Revenue
NMIMS Global Access
School for Continuing Education (NGA‐SCE)
Course: Strategic Cost Management
Internal Assignment Applicable for September 2016 Examination
370 500 510 515 475
Costs 300 325 335 330 325
Finance
charges 15 15 15 15 15
Depreciation 100 100 100 100 100
Profit before
tax (45) 60 60 70 35
The applicable tax rate is 33%. The company’s cost of capital is 12% and the target accounting
rate of return is 25%. The initial investment has no salvage value. The working capital is
expected to be liquidated at the end of the life at its book value.
Compute the NPV and advice the management if the investment should to be undertaken.
Question 2 (10 Marks)
During a recent Management meeting, a newly recruited cost trainee referred to ‘Cost Benefit
Analysis’. To team got excited and asked the trainee to briefly explain what are the benefits &
criticism of Cost Benefit Analysis.
You being the new cost trainee is expected to discuss what ‘Cost Benefit Analysis’ is.
Question 3
(a) The present management team of Sumo Ltd is not happy with the traditional costing
system and have asked you as a Management Accountant to evaluate Activity Based
NMIMS Global Access
School for Continuing Education (NGA‐SCE)
Course: Strategic Cost Management
Internal Assignment Applicable for September 2016 Examination
Costing. Please run the management team through the various steps involved in Activity
Based Cost allocation. (5 Marks)
(b) A new start up is evaluating launching its product in the market. They have appointed a
consultant and are interested in understanding the concept of ‘Product Life Cycle’. You
being the lead consultant, are required to take the management team through a brief
explanation of the same. (5 Marks)
******************
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