FM02 Management Control Systems Assignment I Last Date of Submission: 15th October 2014 Maximum Marks:100 Assignment Code: 2014FM02B1 Attempt all the questions. All the questions are compulsory and carry equal marks. Section-A 1 “Value Chain Analysis can provide valuable inputs for management control”. Do you agree with this statement? Why or why not? 2 Briefly explain: 1. Elements of Control Process 2. Cost-Based Transfer Prices 3. Functions of the Controller 3 What is „Transfer Price‟ and what are the various methods of determining it? 4 What is „Goal Congruence‟? Elaborate Section-B Case Study Division P of Action Shoe company manufactures product “ α “, which is sold to Division Q as a component of product “β”. Product “β” is sold to Division R, which uses it as a component in product “γ” . Product “γ” is sold to customers outside the company. The intra company pricing rule is that products are transferred between divisions at standard cost plus a 10% return on inventories and fixed assets. From the information provided below, calculate the transfer price for product “α” and “β” and the standard cost of product “γ” Standard cost per unit Product “α” Product “β” Product “γ” Rs. 2.00 Rs. 3.00 Rs.1.00 Direct labour 1.00 1.00 2.00 Variable overhead 1.00 1.00 2.00 Fixed overhead per unit 3.00 4.00 1.00 10,000 10,000 10,000 Rs. 70,000 Rs. 15,000 Rs. 30,000 30,000 45,000 16,000 Material purchased outside Standard volume Inventories (average) Fixed assets (net) Page No. 1 of 3 FM02 Management Control Systems Assignment II Assignment Code: 2014FM02B2 Last Date of Submission: 15th November 2014 Maximum Marks: 100 Attempt all the questions. All the questions are compulsory and carry equal marks. Section-A 1. What do you mean by Reporting? How is it useful as a control system? 2. (a) (b) What is a 'Balanced Score Card‟? Briefly discuss how the Balanced Score Card will help to overcome some of the limitations identified above. Suggest a framework for implementing a Performance Measurement System at a large manufacturing organization. 3. What do you mean by budgetary control system? Explain the process of budgetary control in an organization. 4. (a) (b) Discuss the implications of Corporate Strategies for the design of Management Control systems. "Design and operation of control systems are significantly influenced by top management style". Comment. Section-B Case Study The profit budget for the Sinduri company for January 2006 was as follows: Standard cost per unit (Rs.000) Sales Rs.2500 Standard cost of sales 1620 Gross profit Selling expenses 880 Rs.250 Research and Development expenses 300 Administrative expenses 120 Total expenses Net profit before taxes 670 Rs.210 Page No. 2 of 3 The product information used in developing the budget was as follows: Sales units (000) Price per unit P Q R S 1000 2000 3000 4000 Rs.0.15 Rs.0.20 Rs.0.25 Rs.0.30 Standard cost per unit Material 0.04 0.05 0.06 0.08 Direct labour 0.02 0.02 0.03 0.04 Variable overhead 0.02 0.03 0.03 0.05 Total Variable cost 0.08 0.10 0.12 0.17 20 60 60 160 0.10 0.13 0.14 0.21 Fixed overhead (Rs.000) Total Standard cost per unit The actual revenues and costs for January‟2006 were as flows: (Rs.000) Sales Rs.2160 Standard cost of sales 1420 Net standard cost of variances 160 Actual cost of sales 1580 Gross profit 580 Selling expenses Rs.290 Research and Development expenses 250 Administrative expenses 110 Total expenses 650 Net loss (-) Rs.70 P Q R S 1000 1000 4000 3000 Sales Price Rs.0.13 Rs.0.22 Rs.0.22 Rs.0.31 Production 1000 1000 2000 2000 Sales (units) Actual manufacturing cost (000) : Material Rs.360 Labour 200 Overhead 530 Case Question: Prepare an analysis of variance between actual profits and budgeted profits for January 2006. Page No. 3 of 3