The following information is available for a pen making business

22 Sep

Strategic Cost Management


1. The following information is available for a pen making business.

Calculate the following:

a) Contribution

b) PV Ratio

c) BE Ratio (in no. of units and value)

d) MOS

e) Number of pens to be sold to get a profit of Rs. 20,000/-

Sales Price of the pen Rs. 100/- each

Cost of refill Rs. 10/- per refill.

Ink cost Rs. 5 per ml. 2 ml of Ink is required for each pen.

Ball bearings Rs. 3 per bearing

Sticker on the pen Rs. 2 per sticker.

Fixed Costs Rs. 6,00,000 p.a.

2. Select the Financial Statements (Balance sheet / Profit & Loss) of any listed Company. Explain the use of and calculate any 5 ratios. Analyse.

3. a. Explain what is meant by product mix analysis. What are the considerations to make product mix decisions.

3. b. Sanjay is the owner of SSR Pvt. Ltd. He needs to item ‘A’ for his business. He can buy the item at Rs. 50/- per piece. Alternatively, he can produce it in-house. His accountant produces an estimate of the costs of production for the item. Basis that he advises Sanjay not to produce the item in-house as it was costlier. Comment on whether the accountant is right or not. Support with analysis.

Direct Material Cost Rs. 20 per unit

Direct Labour Rs. 10 per unit

Power cost Rs. 5 per unit

Rent of factory allocated to Item A Rs. 18 per unit

Depreciation of Plant used for manufacturing A Rs. 6 per unit.


NMIMS Solutions December 2022

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