Managerlal AccounLlng AMl1AvA CPCSP

WM 7073 (SecLlon 8)
lndlan lnsLlLuLe of ManagemenL Lucknow (WM) age 1
Ass|gnment on Inexper|ence Case Study
MCM manufacLurer and Lradlng flrm LhaL deals ln glfL lLems for exporL and domesLlc markeLs 1hls asslgnmenL ls Lo ascerLaln and
analyze Lhe drawbacks ln Lhelr accounLlng pracLlces due Lo whlch Lhey reporLed negaLlve proflL ln Lhelr quarLer cycle even when
Lhelr sales lncrease
rob|em kequ|red Informat|on for
Dec|s|on Mak|ng
Supp||ed Informat|on
(|n case study)
Source of Informat|on
supp||ed
L|ke|y source of m|ss|ng
|nformat|on
no cosL
classlflcaLlon and
caLegorlzaLlon for
producLlon and
assembly
operaLlons
O DLlllLy cosLs
comprlses of
elecLrlclLy
power and
waLer
O lnsurance
premlum
O Labor cosL
O epreclaLlon
lor beLLer declslon maklng
on cosL conLrol for lndlvldual
operaLlon we need Lo
undersLand abouL Lhe cosLs
lncurred on dlrecL
manufacLurlng operaLlons
and lndlrecL operaLlons We
need Lo ldenLlfy and
blfurcaLe Lhe cosLs lncurred
on producLlon and assembly
operaLlons from Ceneral and
admlnlsLraLlve operaLlonal
cosLs
We need lnformaLlon
producLlon relaLed
lnformaLlon ln one caLegory
and nonproducLlon relaLed
cosLs lnformaLlon ln oLher
general caLegory

Case sLudy provldes very
brlef abouL Lhe
percenLage of cosLs
applled on producLlon
and assembly
operaLlons lollowlng
lnformaLlon ls provlded
relaLed Lo Lhe cosLs
O 70 cosL of Lhe
uLlllLles lncurred on
producLlon and
assembly
O 0 cosL of Lhe
lnsurance premlum
lncurred on
producLlon and
assembly
O 13 of labor cosLs
are dlrecL relaLed Lo
producLlon and
assembly
O 0 of depreclaLlon
DLlllLles lnsurance
wages and depreclaLlon
deLalls are glven ln Lhe
lncome sLaLemenL
deLall
O LasL year balance
sheeL and lncome
sLaLemenL mlsslng
for comparaLlve
analysls for Lhls year
wlLh prevlous year

Managerlal AccounLlng AMl1AvA CPCSP
WM 7073 (SecLlon 8)
lndlan lnsLlLuLe of ManagemenL Lucknow (WM) age 2
rob|em kequ|red Informat|on for
Dec|s|on Mak|ng
Supp||ed Informat|on
(|n case study)
Source of Informat|on
supp||ed
L|ke|y source of m|ss|ng
|nformat|on
for facLory
machlnes flxLures
and equlpmenLs
ls lmporL duLles
dock charges
LransporLaLlon
cosLs sLorlng cosLs
and recelvlng cosLs
should be added Lo
Lhe lnvolce prlce of
maLerlals for cosL
accounLlng?
We need Lo deLermlne oLher
producLlon overheads Lo be
assoclaLed wlLh Lhe prlce of
maLerlal for cosL accounLlng
lor Lhls we need Lo know
Lhe cosL of Lhese charges
collecL and caLegorlzed Lhem
under one head and Lhen
check Lhelr appllcablllLy on
Lhe cosL of producLlon
We need Lo lnsLlLuLe
formal cosLlng and
conLrol sysLems from
Lhe case sLudy and for
LhaL lL has provlded LoLal
cosL deLalls as
O 30 cosLs consLlLuLe
by 8aw maLerlals
O Around 30 of oLher
cosLs relaLe Lo Lhe
paymenLs Lo
crafLsman and oLher
employees (llke
managers
supervlsors helpers
guards and cuLLlng
machlne operaLor)
O 3 ls on hlrlng
speclflc machlnes
8aw maLerlal deLalls are
glven ln 8alance and
lncome sLaLemenLs
eLalls relaLed Lo
overhead lLems glven ln
problem secLlon are noL
provlded ln Lhe case
sLudy We need Lhose Lo
analyze Lhelr lmpacL and
see whlch are appllcable
and added Lo Lhe cosL
accounLlng
Make or 8uy
declslon Lo buy
pasLe maLerlal from
1 M Chemlcals or
follow Lhe same
lnLernal process of
preparlng pasLe
lor Lhe declslon maklng for
Lhls problem we need LoLal
cosLs deLall for
manufacLurlng per kg of cosL
maLerlal lnLernally
O All Lhe labor cosLs and
maLerlal cosLs should be
ln Lhe case sLudy prlce
of purchased pasLe
maLerlal ls sLaLed as 8s
423 per kg
lor Lhe lnLernal producL
cosL
O CosL of organlc
As such source noLhlng
much ls sLaLed ln
lncome sLaLemenL and
8alance sLaLemenL
lndlvldually for maLerlal
cosL Cenerlc
sLaLemenLs are Lhere
CuallLy relaLed
lnformaLlon for Lhe
lnLernally produced
pasLe producL ls mlsslng
ln Lhe glven case and
sLaLemenLs ue Lo Lhe
absence of LhaL case ls
Managerlal AccounLlng AMl1AvA CPCSP
WM 7073 (SecLlon 8)
lndlan lnsLlLuLe of ManagemenL Lucknow (WM) age 3
rob|em kequ|red Informat|on for
Dec|s|on Mak|ng
Supp||ed Informat|on
(|n case study)
Source of Informat|on
supp||ed
L|ke|y source of m|ss|ng
|nformat|on
maLerlal by
Lhemselves
added and Lhen compare
LhaL wlLh Lhe purchase
prlce of Lhe maLerlal
from 1 M Chemlcals
O lor lnLernal
manufacLurlng MCM
[usL purchased speclal
machlne Lo manufacLure
Lhe loLlon for whlch Lhey
have pald 8s 10000
(lncludlng LransporLaLlon
charges)
O 1he oLher noLable polnL
Lo conslder ln Lhls Lhe
quallLy whlch ls
lnLanglble buL havlng
greaL lmpacL on Lhe
producLs dellvered
O As MCM ls an exporL
house whlch dellvers glfL
lLems abroad so quallLy
llkes odorfree and non
sLlcky pasLe ls lmporLanL
8eslde forelgn counLrles
have Lhelr own
envlronmenLal pollcles so
ecofrlendllness of Lhe
pasLe should also be
consldered So lL ls
maLerlal ls
menLloned le 8s
200 per kg
O llxed cosL of labor
le 8s 3000 per
monLh
O varlable cosLs of
labors le 8s 30 per
kg for Lhe pasLe
manufacLured above
100 kg for flrsL labor
lor second labor 8s
23 per kg
such as 8aw maLerlal
purchased and wages
noL reflecLlng Lrue
plcLure wheLher Lo buy
pasLe maLerlal or
process Lhe pasLe
maLerlal
Managerlal AccounLlng AMl1AvA CPCSP
WM 7073 (SecLlon 8)
lndlan lnsLlLuLe of ManagemenL Lucknow (WM) age 4
rob|em kequ|red Informat|on for
Dec|s|on Mak|ng
Supp||ed Informat|on
(|n case study)
Source of Informat|on
supp||ed
L|ke|y source of m|ss|ng
|nformat|on
deslrable Lo conslder cosL
of quallLy for lnLernally
produced pasLe as well
CosL of CuallLy le
ls lL deslrable Lo
purchase hlgh
quallLy producL llke
buy 13v baLLery so
LhaL warranLy
repalrs cosL be
mlnlmum or
purchase ordlnary
maLerlal for
manufacLurlng and
lncrease sales
proflL?
1o make a declslon wheLher
Lo adapL Lhe new 13v
baLLery opLlon and lncurred
more cosL on Lhe producL
and Lo ascerLaln Lhe
warranLy repalr cosLs we
need Lo undersLand boLh Lhe
cosLs approprlaLely
Cbvlously ln Loday's markeL
cosL of quallLy ls lnvaluable
and as already menLloned
Lhe MCM ls an exporL
house so obvlously lL's beLLer
Lo go for baLLery opLlon
O Analyze Lhe LoLal
addlLlonal cosL le 8s
1743 wlLh Lhe cosLs
MCM lncurred on
warranLy or afLer sale
servlces
O MCM would able Lo
reduce repalr cosLs by
993 percenL lf Lhe
componenL ls purchased
from ML and would also
be able Lo save all Lhe
O 1he case sLudy
sLaLed LhaL each new
addlLlonal
componenL boughL
from ML would cosL
8s 1743 more Lhan
one currenLly used
ln puppeL
O AddlLlonally a new
lnsLrumenL wlll also
need Lo be
purchased cosLlng
8s 3000 Lo flx new
componenLs ln Lhe
puppeL Loss on
machlne lf sold ln
Lhe markeL ln case of
no use 8s 1330 (8s
2123 8s 373)
Cnly menLloned ln case
sLudy no menLlon ln
lncome or 8alance
sLaLemenL
O no lnformaLlon
relaLed Lo cosL of
WarranLy and afLer
sales servlces ls
Lhere so lL ls hard Lo
comprehend Lhe
beneflLs of uslng
new baLLery
producL
O lor lnLernal
manufacLurlng cosL
deLalls are noL glven
so due Lo LhaL we
are noL able Lo Lake
any raLlonal declslon
Lo carry on wlLh
exlsLlng pracLlce ln
flrm
Managerlal AccounLlng AMl1AvA CPCSP
WM 7073 (SecLlon 8)
lndlan lnsLlLuLe of ManagemenL Lucknow (WM) age 3
rob|em kequ|red Informat|on for
Dec|s|on Mak|ng
Supp||ed Informat|on
(|n case study)
Source of Informat|on
supp||ed
L|ke|y source of m|ss|ng
|nformat|on
rework cosL on Lhe
componenLs
O lnLernal cosL deLall for
Lhe puppeL
manufacLurlng also
requlred whlch ls noL
Lhere ln Lhe case sLudy
We need LhaL Lo
undersLand lnLernal
cosLlng
CosL allocaLlon
problem
O varlable cosL
lnformaLlon ls
noL Lhere
LlecLrlclLy bllls
lncreaslng wlLh
Lhe lncrease ln
producLlon 1he
correlaLlon of
LhaL needs Lo be
deLermlned
O Salary of
supervlsor ls
noL properly
allocaLed Lo Lhe
producLlon lL
has Lo declde
wheLher Lhe
O need Lhree quarLers
deLalls for elecLrlclLy bllls
ln relaLlon Lo producLlon
O Wages of supervlsor ls
provlded 8s 9000 per
monLh LhaL monlLors
new worker As enLlre
lncreased producLlon for
Lhe year of dlfferenL
lLems would noL be sold
ln Lhe currenLly quarLer
so we need Lo
apporLloned Lhe cosL of
Lhe supervlsor Lo Lhe
dlfferenL cosL lLems 1hls
needs Lo be deLermlned
wheLher Lhls wlll be
allocaLed Lo a producLlon
llne or Lo general selllng
ln Lhe case sLudy
monLhly salary of 8s
9000 ls menLloned for
Lhe addlLlonal
supervlsor LhaL we need
Lo conslder
lncome sLaLemenL have
some salary and wages
relaLed componenLs
O Wages
O Cfflce and
admlnlsLraLlve sLaff
salary
O LlecLrlclLy deLalls for
Lhree quarLers
requlred Lo make a
relaLlon of LhaL wlLh
Lhe producLlon
O need Lo ldenLlfy
lndlvldual cosL
cenLers and for LhaL
requlred clear
caLegorlzaLlon of Lhe
cosL operaLlons
Managerlal AccounLlng AMl1AvA CPCSP
WM 7073 (SecLlon 8)
lndlan lnsLlLuLe of ManagemenL Lucknow (WM) age
rob|em kequ|red Informat|on for
Dec|s|on Mak|ng
Supp||ed Informat|on
(|n case study)
Source of Informat|on
supp||ed
L|ke|y source of m|ss|ng
|nformat|on
supervlsor cosL
wlll be dlrecLly
levled Lo Lhe
producLlon or
Lo Cfflce and
admlnlsLraLlve
sLaff salary LhaL
proper
caLegorlzaLlon ls
noL Lhere
and admlnlsLraLlve cosL
CpporLunlLy cosL Lo
buy Lhe ground
floor ln a newly
consLrucLed
bulldlng Lo sLore
surplus raw
maLerlals and
flnlshed producLs
We need Lo analyze and
deLermlne Lhe losL cosL
opporLunlLy on renLlng a new
sLore floor and wheLher LhaL
needs Lo recorded ln Lhe
accounLlng books lor Lhls
we need Lo deLermlne sales
flgures and proflLs from
Lhem so LhaL we can ldenLlfy
Lhe sales wlll really be
greaLer Lhan opporLunlLy
cosL and beLLer Lo buy Lhe
ground floor Lo hold exLra
lnvenLory for fuLure sales
O CpporLunlLy cosL of
8s 730000 ls
provlded for buylng
Lhe ground floor ln
case of holdlng exLra
revenue
O Sales pro[ecLlon of
3 percenL
compound lncrease
durlng Lhlrd and
fourLh quarLer of
years ls provlded
O AbouL percenL of
Lhe exporL sales are
aL Lhe Llme of
ChrlsLmas and new
?ear
As such Lhls cosL ls noL
Lhere ln lncome and
8alance sheeL
sLaLemenLs lL's only
glven ln Lhe case sLudy
secLlon
roflL from Lhe sales
pro[ecL ls mlsslng whlch
we can compare wlLh
opporLunlLy cosL
ls conLlnuaLlon of
manufacLurlng of
We need Lo deLermlne
wheLher lLs proflLable Lo
ln case sLudy only Lhe
problem ls sLaLed LhaL
Cnly ln case sLudy Lhls
problem ls sLaLed no
LxacL cosL and prlce of
Lhe [ewelry box along
Managerlal AccounLlng AMl1AvA CPCSP
WM 7073 (SecLlon 8)
lndlan lnsLlLuLe of ManagemenL Lucknow (WM) age 7
rob|em kequ|red Informat|on for
Dec|s|on Mak|ng
Supp||ed Informat|on
(|n case study)
Source of Informat|on
supp||ed
L|ke|y source of m|ss|ng
|nformat|on
!ewelry box
requlred or sLop
LhaL due Lo low
yleld ln proflL
marglns
manufacLure [ewelry box
even ln case lL yleld nomlnal
proflL margln or dlsconLlnue
Lhe producLlon of LhaL and
concenLraLe on hlgh yleldlng
proflL margln producLs
lor LhaL we need cosL deLalls
of manufacLurlng [ewelry box
for comparlng Lhe cosL of
LhaL wlLh lLs prlce for proflL
esLlmaLlon and wlLh oLher
lLems
Cn Lhe basls of LhaL we wlll
esLabllsh wheLher Lo keep
manufacLurlng [ewelry box
or reduce lLs producLlon or
really sLop manufacLurlng
LhaL
MCM ls geLLlng lower
proflL margln on
manufacLurlng !ewelry
box buL noL oLher much
deLall provlded
cosL deLall provlded ln
8alance or lncome
sLaLemenLs
wlLh oLher glfL lLems are
noL menLloned LhaL can
help us ln ascerLalnlng
Lhe neL proflL of Lhe
[ewelry box ln
comparlson wlLh oLher
glfL lLems
CaLegorlzaLlon and
allocaLlon of facLory
overheads llke
labor salarles renL
and Laxes eLc
We need Lo deLermlne Lhe
flxed cosLs assoclaLed wlLh
Lhe company so LhaL we can
analyze Lhe flxed cosL LhaL
company lncurred on
dlfferenL operaLlons
lor Lhls we need cosL
lnformaLlon relaLed Lo flxed
lLems llke salarles of
supervlsor and waLchman
who do noL parLlclpaLe
Case sLudy secLlon
menLloned abouL such
flxed cosL operaLlons ln
Lhe case sLaLemenL for
whlch we need Lo
calculaLe Lhe LoLal flxed
cosL and use LhaL for
analysls
Such flxed cosLs deLall
are provlded ln Lhe
lncome sLaLemenL ln Lhe
form llke Cfflce and
AdmlnlsLraLlve sLaff
salary renL sales force
salary adverLlslng eLc

Managerlal AccounLlng AMl1AvA CPCSP
WM 7073 (SecLlon 8)
lndlan lnsLlLuLe of ManagemenL Lucknow (WM) age
rob|em kequ|red Informat|on for
Dec|s|on Mak|ng
Supp||ed Informat|on
(|n case study)
Source of Informat|on
supp||ed
L|ke|y source of m|ss|ng
|nformat|on
dlrecLly ln Lhe producLlon buL
company pald Lhem Lhe
salarles
Secondly we need Lo
deLermlne Lhe renL cosL LhaL
company pald
1hlrdly 1axes LhaL company
has Lo pay Lo Lhe
governmenL
Assembly llne
manufacLurlng ls
mlsslng ln Lhe
producLlon llne
Lach crafLsman was
performlng all Lhe
acLlvlLles
O ManufacLurlng process ls
deflned for creaLlng Lhe
[uLe maLerlal
O lor undersLandlng
lmprovemenL ln
assembly llne each
crafLsman shall be
Lralned and speclallzed ln
a parLlcular acLlvlLy or seL
of acLlvlLles dependlng
on hls lnLeresL capablllLy
and Lralnlng so we need
Lo ldenLlfy Lhe process
uslng whlch crafLsman
become more
producLlve
O ManufacLurlng
process of [uLe ls
provlded LhaL
conslsLs of Lhe
process of grlndlng
cleanlng segregaLlng
and cuLLlng Lhe raw
[uLe
O 1hree Lypes of [uLe
provlded ln Lhe
proporLlon of
304030
O CperaLlons for Lhe
glfL producLlon
comprlses of
carvlngs flxlng exLra
lLems cleanlng
cuLLlng gllLLerlng
pollshlng and oLher
acLlvlLles
Case sLudy secLlon has
descrlbed Lhe problem
need lnner deLall on Lhe
cosLlng on lndlvldual
operaLlons
Managerlal AccounLlng AMl1AvA CPCSP
WM 7073 (SecLlon 8)
lndlan lnsLlLuLe of ManagemenL Lucknow (WM) age 9
rob|em kequ|red Informat|on for
Dec|s|on Mak|ng
Supp||ed Informat|on
(|n case study)
Source of Informat|on
supp||ed
L|ke|y source of m|ss|ng
|nformat|on
8reak even cosL
analysls Lo
deLermlne how
much or mlnlmum
quanLlLy of lLems
needs Lo produce
Lo earn maxlmum
proflL Cn Lhe basls
of LhaL need Lo
esLabllsh mlnlmum
prlce Lo Lhe lLems
O 1he flrm expecLs 33
percenL margln on Lhe
cosL of lLems produced Lo
meeL speclal orders
O Lmporlums lnslsL on
paylng some flxed mark
up on Lhe acLual cosL of
produclng Lhe lLems
O MCM ls plannlng Lo
lnclude an lnLeresL [12
percenL on flrmowned
properLy and a noLlonal
perlodlc reward for Lhe
efforLs made
O 33 percenL proflL
margln ls glven
lnformaLlon ls provlded
ln Lhe case sLudy
secLlon
need Lo know Lhe LoLal
cosL (varlable and flxed)
of lLems so LhaL we can
esLabllsh mlnlmum
quanLlLy on Lhe basls of
break even analysls