Cost and Management Accounting
1. Vimla Spice company exports spices to Europe and Middle East. Given the slowdown in business due to the recent COVID-19 impact, their profits have been impacted significantly and actual profits are lower than budgeted sales by almost 30 to 40%.The Management was extremely concerned and called for a meeting of the top team to decide the way forward. The following 2 decisions were taken in the meeting: a. Identify new markets for exporting spices to increase Sales b. Hire a Management accountant to understand how they can reduce costs etc Mr Bond was hired as the Management accountant and he submitted his report to the Management within a month. The Management had thought profit reduction was primarily o/a Sales Variance but were indeed surprised to see the report as there were several other variances analyzed by Mr Bond with respect to various elements of costs, sales and profit as follows:
1. Material cost variances
2. Labor cost variances
3. Overhead variances
4. Sales variances
5. Profit variances
a) Describe Standard Costing and its applicability in specific industries b) Describe any 2 of the above Variances and their sub variances c) How will it benefit Vimla Spice Co if it implements Standard costing in the Co (any 2 benefits) (10 Marks)
2. “Eat Healthy” is a start up venture started by Ram and Lakhan planning to sell sugar free cakes, cookies, multi grain bread etc. They are confused as to which type of Costing method should be employed by them, Job costing or Process Costing. Describe Job costing and Process Costing to them and explain the differences between Process costing and Job costing (Any 5). (10 Marks)
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