Cost & Management Accounting, Dec 2025 NMIMS Assignment

Description

Cost & Management Accounting

Internal Assignment Applicable for Dec 2025 Examination

 

Q1 A factory produces a single product. The following information relates to the month

of March:

– Standard labour time per unit = 2.0 hours.

– Standard labour rate = Rs.100 per hour.

– Actual production = 1,000 units.

– Actual hours worked (including idle time) = 2,200 hours.

– Idle time during the period = 100 hours (paid but unproductive).

– Actual average labour rate paid = Rs.95 per hour.

Overheads:

– Budgeted fixed factory overheads = Rs.1,00,000 per month.

– Budgeted variable factory overheads = Rs.20 per productive hour.

The overhead absorption basis is labour hours; standard hours for absorption = hours required for actual output (i.e., 2.0 hr × 1,000 units).

 

– Actual fixed overheads incurred = Rs.1,10,000.

– Actual variable overheads incurred = Rs.46,000.

Required:

(a) Calculate the standard labour cost for the output, actual labour cost, labour rate variance, labour efficiency variance.

(b) Compute the overhead absorption rate per hour, overheads absorbed, and state whether overheads are over- or under-absorbed and by how much.

(c) Suggest two control measures (brief) — one for labour cost control and one for overhead control.

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Q2 (A) A manufacturing company is reviewing its inventory valuation methods. The finance team notes that FIFO and LIFO, each impact reported profits, tax liabilities, and inventory values differently, especially during periods of volatile material prices. The operations team is concerned about the complexity of calculations and the alignment with actual material flows. The management team must decide which method best supports both financial reporting and operational needs. Evaluate the implications of choosing between FIFO, LIFO for inventory valuation in a manufacturing company experiencing frequent price fluctuations. How should management decide which method to adopt, and what improvements would you suggest to ensure both financial accuracy and operational Efficiency?

(5 Marks)

Q2 (B) A textile mill’s spinning department reported an abnormal gain this quarter, with actual production surpassing the normal output due to enhanced worker efficiency and minor process improvements. While this has led to lower per-unit costs and higher reported profits, the finance director is concerned about whether this gain is sustainable and how it should influence future budgeting, cost estimation, and operational planning. Assess the managerial response to an abnormal gain in a textile mill’s spinning process, where actual output exceeded expected levels due to improved worker efficiency. How should management adjust future cost estimates and operational strategies in light of this abnormal gain, and what are the potential risks of misinterpreting such gains in process costing?

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