MCS Assignment (write any 3)

Budget Preparation (answer any one)

1. What do you understand by operation budget and what are its characterisitcs features? While
distinguishing forecast from budget, explain advantages of budget.

2. What is budgeting? Explain the process of budget preparation.

Performance Measurement System (answer any one)

1. Describe Balance Scorecard method. What are its advantages?

2. Explain in detail of key variables related to customer and to internal business processes.

Management Compensation (answer any one)

3. Write a short note on Management Compensation with brief description of various
components and their significance.

4. People are influenced by both positive and negative incentives. Validate the statement
from research findings.

Transfer Price (answer any one)

1. Division of E of ABC Ltd. Manufactures product O which is sold to division F asa component of
Product P. Product P is sold to division G which uses it as a component in Product Q. Product Q is
sold to outside of the company. The intra company pricing rule is that product are transferred
between divisions at standarad cost plus 10% return on inventories and fixed assets. The following
information
Particulars is provided: Product O Product P Product Q
Material purchased outside 4 6 2
Direct Labor 2 2 4
Variable overheads 2 2 4
Fixed overhead per unit 6 8 2
Standarad Volume 20000 20000 20000
Inventories 140000 30000 60000
Fixed Assets 60000 90000 32000

Required:
1. Calculate transfer price for products O and P and total cost for Q.
2. The present selling price for product Q is Rs. 56. Listed below is series of possible
price reductions by competition and probable impact of these reductions on the
volume of sales if division G does not reduce prices:
1. Possible competitive prices: Rs. 54; Rs.52; Rs. 50; Rs. 46; Rs. 44
2. Sales volume if price of Product Q is reduced to competitive levels: 20000;
20000; 20000; 20000
3.Sales volume if price is not changed: 18000;14000;10000;4000;0
Give your suggestion to take pricing decision for product Q.
 2. Ganesh Scooters operates as Strategic Business Units and has 2 divisions. Division A
produces the parts of scooter and Division B manufactures assembles scooter using the parts
produced by Division A.
Division A's manager has the autonomy to sell all 10000 units of body parts either to
Division B or the the outside market.
Output of Division A:

Per month capacity to produce scooter parts 10000 units

Internal transfer to division B per month 10000 units
Costs of Division A:

Variable manufacturing cost per unit Rs. 9100

Variable selling cost (applicable only if body Rs. 280
parts are sold outside)
Fixed Manufacturing cost Rs. 75,00,000
Selling price of Division A's product to outside Rs. 11500
market

Division B uses the parts made by Division A to assemble the entire scooter. In doing so Division B
incurs the following add on expenses:

Costs of Division B

Variable manufacturing cost per unit (does not Rs. 6700

include tansfer price of Division A)
Variable selling costs per unit Rs. 800
Fixed manufacturing cost Rs. 50,00,000
Selling Price of Scooter Rs. 21700
Per month output of Division B 10000 units

Required:
i. Calculate transfer price using Cost plus Method. Division A expects to earn a margin of
15%
ii. Using cost plus method, calculate the profitability of Division A and Division B.

3. What are objectives of 'Transfer Pricing'? Explain in short various methods of transfer
pricing.