Cost and Management Accounting Solved Assignments For June 2026 – Sem 1

Description

NMIMS

COST AND MANAGEMENT ACCOUNTING

APPLICABLE FOR SEM 1 OF JUNE 2026 EXAMS

Q1. A home appliance manufacturing company is preparing a cost sheet to analyze the production cost of its newly launched electric kettles. During the month of April 2026, the company produced 5,000 units. The following cost information is available: Direct Materials Rs.3,00,000; Direct Labour Rs.2,00,000; Direct Expenses Rs.50,000; Factory Rent Rs.60,000; Factory Power and Fuel Rs.40,000; Office and Administrative Expenses Rs.70,000; Selling and Distribution Expenses Rs.80,000. The company desires a profit of 20% on Cost. Required: a) Prepare a Cost Sheet showing Prime Cost, Factory Cost, Cost of Production, Total Cost (Cost of Sales). b) Calculate the Selling Price per Unit if profit is 20% on total cost. (10 Marks)

Ans.1

Introduction

A cost sheet is a critical managerial accounting instrument that manufacturing companies employ to systematically present the various components of production costs. It assists in the determination of the total cost, the analysis of cost behavior, and the establishment of an appropriate selling price. In this instance, a home appliance manufacturing company has manufactured 5,000 electric kettles in April 2026 and is interested in calculating the various cost components and determining the selling price with a desired profit margin of 20% for the cost. The creation of a cost document will offer a clear understanding of profitability and cost allocation.

(a) Preparation of Cost Sheet

Step 1: Calculation of Prime Cost

Prime Cost includes all direct costs:

• Direct Materials = ₹3,00,000
• Direct Labour = ₹2,00,000
• Direct Expenses = ₹50,000

Q2 (A). A fast-growing electric scooter company has recently expanded production due to increasing demand. However, the CEO notices that despite higher sales, overall profitability is not improving significantly. The finance team suggests implementing budgeting, variance analysis, and performance reports to better understand cost behavior and operational efficiency. Explain how Management Accounting techniques can help the company improve planning, cost control, and strategic decision-making in this situation. Support your explanation with relevant examples. (5 Marks)

Answer 2a 

Introduction

Management Accounting is essential in assisting organizations in making well-informed decisions, particularly in cases where sales growth does not result in increased profitability. The challenge for a rapidly expanding electric scooter company is to identify inefficiencies, control costs, and align operations with strategic objectives. Valuable insights into operational performance and cost behavior can be obtained through techniques such as variance analysis, performance reporting, and budgeting, which facilitate improved planning and control.

Q2 (B). A consumer electronics company producing Bluetooth headphones reported different profit figures under Marginal Costing and Absorption Costing during the same financial period. The finance manager observed that production was higher than sales, resulting in unsold inventory at the end of the period. The management wants to understand why profit figures differ under the two costing methods. Explain how Marginal Costing and Absorption Costing treat fixed manufacturing overheads differently, and how this difference leads to variation in reported profit when production exceeds sales. (5 Marks)

Answer 2b

Introduction

The profitability of an organization is substantially determined by its costing methodologies. Marginal Costing and Absorption Costing, two techniques that are frequently employed, frequently generate disparate profit figures, particularly when there is an imbalance between production and sales. In the scenario of a consumer electronics company that manufactures Bluetooth headphones, production exceeds sales, resulting in unsold inventory. The primary