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 |