Hemant pandey WMP13017
S.N
o Issues under consideration
Loss of Rs. 30 million in 3rd
quarter of 2008 to MGPM
1 (owned by Mr. Joginder Singh
Marwah)
Study of reasons for loss &
challenges in studying
2
Analysis of expenses & assets Total expenses, total
assets s
3 - Rent : 85% - for factory
Inexperience Case Issue
Possible sources
Desired Information Available information Gap of information
- Net P&L of the quarter - CA educational background. Calculation of Projection &
- Calculation of projected - Owner(Joginder) extremely projected profit Estimates made
profit surprised with the result, begining of year
Expectation was profit
Procedure for studying Procedure No scientific method Expert advice/CA
Accumulate, classify & group all to ovecome
the cost for challenges
1) ascertain all total & unit cost
2) observe trend
3) control them
4) analyze them for planning ,
control& decision making purpose
Challenges
-Not sure about difference
Analysis of expenses Not applicable
' - Utilities : 70% - for production &
assembly shops.
- Premium : 80% -for prodcution
& assembly shops.
Remaining premium & utlities
cost - for office, adminstrative &
selling activities
operations
- Labour : 15% - for activities in
fatory & assembly lines.
85% - for common
services
- Depreciation: 60%- for factory
machines , equipments, fixtures.
40% - for selling
 Whether Cost of Ordering(dock
charges & import duty),
transporation charges, storage
, insurance cost of raw material
4 should be added to invoice
price.
Pasting material: Whether to
buy from TM chemicals or
make in house
5
Electronic components from
Monika Electronic
6
a) Increased electricity bill
during this quarter
b) Hiring of Production
Supervisior
7 2) Hired new unsilled workers for
Analysis of product cost-Raw material: 50% cost of total Absorbtion of Invoice, BOM,
break up cost of high demand items. Import Duties, Expert advice
Process:Price of raw - Raw cotton, wool & clay - Transportation
material & semi finisheddirect cost(conveniently traced to charges be
products (purchase from spefic items) considered in
suppliers) - Synthetic gum ,minor Invoice price
regional jewellery & decoration
pieces : form insignificant portion
of total cost
Consumption of gum. If made in house Quantity of gum Trend of
Price in making & buying - Rs. 10,000 - cost of machine consumption of
- Rs. 200/kg - cost of raw gum quantity
material during past few
- Rs. 5000 - Juggu's salary quarters
If more than 100kg , Rs. 5000 +
30/kg
- Rs. 25/kg - Mukku's salary
if more than 160kg, total salary
expense = Rs. 4000
If purchased from TMC : Rs.
a) Should Joginder buy Delta cost (increase) = Rs. 17.43 Customer Information about
electronic components Instrument(to fix electronic preferenceto sales price &
from Monika Elctronics? component in puppet) = Rs. 5000 imporved quality, customer
B) Whether to sell rework cost preference to
current fixing machine to Effect : quality improvement, defect quality, market
Mahavir handicraft. free product, saving in rework cost survey
Calculation of inventory Increased electricity bill during this Method to decide Expert advice/CA
cost (as all additional quarter cost center & budget
units will not be sold in Reason: head for supervisor
current quarter) 1) Increased production salary
Allocation of supervisor increased production Which item
salary to which cost 3) Purchase of addional Cotton, consume
center/budget head clay , clothes, stone & other supervisor's how
material much time.
 Storage cost for increased
volume in Q3 & Q4
8 Forecasted in 1st & 2nd quarter:
Reduction in range of product Total loss in jewellery
by discotinuing unprofitable
9 products
a) Change in processing of
Jute
10
b) Change in handicrafts
assembly proces
Opportunity to supply of
premium items to Cottage
Emporium
11
How to show owner's Sales forecast Opportunity cost of Expert advice - for
capital in accounting Forecast in quarter 3 & 4: 38% buying ground floor showning owner's
books compound increase capital in
accounting books.
Opportunity cost for 8%
current storage cost Export sales : 85% during Selling cost of
(Rs.7,50,000) Christmas & New year time. products stored as
Pros: Reduction in cost of precise Loss in jewellery Market surveys on
boxes & opportunity material used in making of boxes, Increase in sales due to
cost (Increase in sales of jewellery boxes sales of other availability of
other product due to Cons:1) If discontinue making product due to range
visibility of variety) jewellery boxes , have to pay visibility of variety
Saving percentage a) Saving of 20% through Jute Nil
processing.
b) Saving of waste by 15% by
change in assembly process
1) Minimum quantity firm expects 55% profit margin on Increase in sales Sales increase
2) Competetive price specially ordered items) quanity projection if projection from
- At the time of bargain, credibility increases. Marketting
government may ask cost break up Study of breakeven
Current practice: Include out of price(competetive
pocket cost + labour price Vs increase in
Planning to include: sales due to