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 |