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Course: Cost and Management Accounting
Internal Assignment Applicable for April 2022 Examination
- Department A’s manager wishes to apportionment the indirect expenses identifiable
with department A to all the other departments of the organization. However, the
managers of other departments opine that the indirect expenses allocated to department
A cannot be apportioned to other departments. Elucidate the terms ‘allocation and
apportionment’ and bring out the differences between them to department A’s manager.
Also, provide five examples of cost items to the manager that are suitable for
apportionment and their respective basis of apportionment. Identify if department A’s
manager was correct. (10 Marks)
- Plyway manufactures and sells wooden chairs. The chief accountant of the entity is
contemplating whether to follow marginal costing or absorption costing for preparing
the profit statement. Explain any three advantages of marginal as well absorption
costing to the chief accountant. Also, try to bring out three differences between marginal
and absorption costing to make the choice easy for the chief accountant. If the chief
accountant is preparing the profit statement for internal, decision-making purpose,
which of the two methods should she follow? (10 Marks)
- Framers is in the business of trading in frozen mango pulp tins. It always maintains a
more inventory than required and hence incurs a huge amount of holding (carrying)
costs. It wishes to know the ideal quantity of inventory to be ordered that would
minimize the ordering as well as the holding costs. It provides the following
a. Annual requirement 30,000 packets; cost of one packet is ₹1200; ordering cost is ₹3,240
per order and holding cost is 5 percent. Compute the economic order quantity.
b. What is the total inventory cost if the company has been ordering 2,500 packets with
every order? Would the total inventory cost be higher or lower than the EOQ?