MCO 05 Solved Assignment
MCO 05 Solved Assignment Accounting for Managerial Decisions (MCO 05)
Master of Commerce
Second Year Assignments
For July 2020 and January 2021 admission cycle
July 2020 and January 2021
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Title – Accounting for Managerial Decisions (MCO 05)
University – Ignou
Assignment Types – PDF, SOFT COPY /Handwritten on order
Course – Master of Commerce
(M.Com) Second Year Assignments
Medium / Language –ENGLISH / HINDI MEDIUM
Session – JULY 2020, JANUARY 2021
Subjects code – MCO 05
Assignment Submission Date – July 2020 session के लिए – 31 March 2021, January 2021 session के लिए – 30 September 2021.
MCO 05 Solved Assignment 2020 – 2021
Q. 4. (a) What do you understand by Standard Costing? Explain the advantages and limitations of Standard Costing.
Ans. Standard costing is the use of standard costs for purposes of planning, control and correction by comparing actual cost with the standard cost. According to Wheldon, standard costing is a method of ascertaining the cost
whereby statistics are prepared to show (a) standard cost (b) the actual cost and (c) the difference between these costs which is termed the variance. According to W.W. Bigg, “ Standard costing discloses the cost deviations from standard and classifies these as to their causes, so that management is immediately informed of the spheres of operations in which remedial action is necessary.” CIMA defines standard costing as “the preparation and use of
standard costs, their comparison with actual cost and the analysis of variances of their causes and points of incidence.”
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Under standard costing detailed comparisons are made between standard material, labour and overhead cost of a product and actual material, labour and overhead cost of the same product for ascertaining what has gone wrong
where, which variances are favourable (i.e., actual cost is below standard cost) and which are adverse (i.e., actual cost is more than standard cost), which of the adverse variances are due to controllable factors and corrective action needs to be taken and which are due to non-controllable factors.
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Standard costing involves the following steps:
(i) Determination of standard cost not only for each product but for each cost component in a scientific and realistic manner.
(ii) Correct ascertainment of actual cost for each product with full details regarding the actual cost of each cost component.
(iii)Regular comparison of actual cost with the standard cost.
(iv) Determining variances, i.e., deviations from standard cost, for each cost component.
(v) Analysing in proper depth all favourable and adverse variances giving the incidence of these variances, their causes, both controllable and non-controllable.
(vi) Preparing reports for the managers of concerned responsibility centre and senior management, wherever required, giving the above details for facilitating corrective action.
Objectives of Standard Costing: Following are the objectives of standard costing:
(i) To control the cost by comparing actual costs with standard costs.
(ii) To help the management in exercising control through the principle of management by exception.
(iii)To make the employees cost conscious.
(iv) To help the management in determining prices and formulating production policies.
(v) To ensure management planning.
Advantages of Standard Costing: Following are the advantages of standard costing:
MCO 05 Accounting for Managerial Decisions Solved Assignment 2021
1. Basis for evaluation of actual performance: Standard costing is a yardstick for measuring performance. The comparison of actual costs with standard costs enable the management to evaluate performance of various cost centres. The effectiveness in the use of materials and operational efficiency of workers can be easily evaluated on the
basis of pre-determined standards. The study of variances enables the management to identify areas of deficiency and take corrective measures in time.
2. Management by Exception: With the use of standard costing, the targets of different individuals are fixed. If the performance is according to pre-determined standards then there is nothing to worry. The attention of management is drawn only when actual performance is less than budgeted performance. Management by exception means that everybody is given a target to be achieved and management need not supervise each and everything. The responsibilities
are fixed and everybody tries to achieve his targets.
MCO 05 Solved Assignment
3. Formulation of Production and Price Policy: Standard costing is helpful in formulating production policies.
The standards are set by studying all existing conditions. It becomes easy to formulate production plan by taking into account standard costs. It is also helpful for finding prices of various products. In case tenders are to be submitted or prices are to be quoted in advance then standard costing produces necessary data for price fixation. In a competitive market, proper fixation of prices of products and determination of production policies enable the firm to face competition successfully.
4. Cost Control and Elimination of Wastage and Losses: Standard costing is a technique of cost control. Proper control of man, material and machine reduces wastage and losses. Constant comparison of actual performance with standard, fixed and quick corrective action would eliminate wastage and losses and make everyone in the organisation cost conscious.
MCO 5 Solved Assignment 2020 – 2021
5. Determination of Variances: By comparing actual costs with standard costs variances are determined. Management is able to spot out the place of inefficiencies. It can fix responsibility for deviation in performance. It is possible to take corrective measures at the earliest. A regular check on various expenditures is also ensured by standard costing system.possible to take corrective measures at the earliest. A regular check on various expenditures is also ensured by
standard costing system.
MCO 05 Solved Assignment in English Medium