Strategic Cost Management

16 Sep

Strategic Cost Management

1. XYZ is considering a Project with an initial investment of Rs.100,000. Three probable cash flow scenarios with their probabilities of occurrence are as under:

Annual Cash Flow (Rs.) 20,000 30,000 40,000
Probability 0.1 0.7 0.2

Project life is 5 years with expected return of 20%. The expected terminal values associated with each of above probabilities are Rs.0, Rs.20,000 & Rs.30,000. Find the probable NPV.

2. An M&A expert has been hired to explain to the management of a sick company the symptoms that are normally seen before a company qualifies for being referred to as a BFIR candidate. You being a freshly appointed Management Trainee are required to present a small write up, briefly explaining those early symptoms.

3. a) From the following particulars, calculate: Material Cost Variance & Material Price Variance

Quantity of materials purchased 3000 units
Value of materials purchased Rs.9000
Standard quantity of materials required per tonne of output 30 units
Standard rate of material Rs.2.5 per unit
Opening stock of materials nil
Closing stock of materials 500 units
Output during the period 80 tonnes

3. b) Calculate Labour Yield Variance from the following data:

Standard Output 500 units
Actual Output 450 units
Standard Time 1000 hrs
Standard Rate Rs.20 per hour

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