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FM10

Strategic Cost Management

(For CNM Cases)

Assignment - II

Assignment Code: 2016FM10A2                                                                             Last Date of Submission: 30^th April 2016

                                                                                                                                             Maximum Marks: 100

Attempt all the questions. All the questions are compulsory and carry equal marks.

                                                                                                  Section-A

1              Distinguish between structural cost drivers and executional cost drivers by giving suitable                                          examples.

2              Briefly explain Activity based Costing and describe the steps involved in designing an ABC                                          system for a manufacturing organization.

3              Briefly explain the following:

                             1.               Non-financial Performance Measures.

                             2.               Experience Curve.

                             3.               Quality Costs.

                             4.               Technology as Cost Driver.

4              (a)          Explain the traditional views on thinking about ‘Quality’ and ‘Cost’.

                (b)          Explain why in the model plants, zero defects would lead to near zero quality cost. Why                                                             is conventional reporting on quality could be a barrier to Total Quality Management.

Section-B

Alpha Ltd

The company seeks to measure customer response time with the specific purpose of improving the same.  In the case of single manufacturing process, it has to take operational measures to reduce set up time and product waiting time.  These controls are evaluated by informational feedback such as “manufacturing cycle time,” and relevant `contribution’ analysis.  In the case of multiple processes, it is important to identify manufacturing bottlenecks” and devise measures to improve performance therein.  Accordingly, suitable informational controls such as `through put contribution’ have to be instituted to measure improvements in such bottleneck situations.  However, if product related strategies aim to Just in Time (JIT) purchases and production then the organization might have to instal a system of `kanabs’ to facilitate every process to intimate its material requirements to the preceding process station ending with the first process station placing orders with the suppliers.  Besides, the minimum acceptable level of inventories to be kept at every process and suggested lead time for supply of materials to succeeding stations have to be finalized.

Such measures have to be supported by relevant cost information in JIT information.

Answer the following:

i.             What is the nature or type of strategy discussed in the above mentioned case?

ii.            Which tool and technique of strategic cost management is present in the company?