IGNOU| ELEMENTS OF COSTING (ECO - 10)| SOLVED PAPER – (DEC - 2023)| (BDP)| ENGLISH MEDIUM
BACHELOR'S DEGREE PROGRAMME
Term-End Examination
December - 2023
ELECTIVE COURSE: COMMERCE
ECO-10
ELEMENTS OF COSTING
Time: 2 hours
Maximum Marks: 50
Note: Attempt any two questions from Section A and any two
questions from Section B.
हिंदी माध्यम: यहां क्लिक करें
Section—A
1. What are the advantages of cost accounting? 10
Ans:- The main advantages of cost accounting are:-
(i)
Disclosure of profitable and unprofitable activities: Cost
accounting provides detailed information about the cost, selling price and
profitability of each product or activity, allowing profitable and unprofitable
items to be identified.
(ii)
Guidance for future production policies: Cost data obtained from the cost
department helps in planning future production and operations.
(iii)
Periodic determination of profit and loss: Cost accounting enables periodic
calculation of profit and loss for each product.
(iv)
Identifying reasons for changes in profit: Cost accounting can pinpoint the
exact reasons such as higher costs or lower selling prices behind changes in
profitability.
(v)
Control over materials and supplies: Cost accounting provides better
control and accounting for material and supply costs by department, process or
unit.
(vi)
Comparison of relative efficiency: Cost accounting allows reliable
comparison of efficiency and costs between products, services and operations.
(vii)
Helpful to government for policy decisions: Cost data helps the government in
planning policies relating to imports, exports, industry and taxation.
(viii)
Proper inventory investment and valuation: Cost accounting enables optimum
inventory levels and more accurate inventory valuation.
(ix)
Informed make-or-buy decisions: Cost data helps management decide
whether to manufacture in-house or buy from outside.
(x)
Budgeting and cost control: Cost accounting provides the basis for
budgeting, setting standards and controlling costs.
2. Discuss the advantages and disadvantages of centralised
purchasing. 7+3
Ans:- Centralised procurement is a procurement
strategy in which a single department or unit manages all procurement
activities in the organisation.
This
approach has both advantages and disadvantages, which are discussed below:-
Advantages
of Centralised Procurement:-
(i)
Improved strategic efficiency:
(a)
Centralised procurement links long-term business goals directly to procurement
initiatives, making strategic decisions more effective.
(b) It
improves visibility within the organisation, leading to better participation in
long-term strategic planning.
(ii)
Greater procedural efficiency:
(a)
Centralised procurement eliminates duplicated and redundant efforts by sharing
information and resources.
(b) It
allows the combination of departmental purchases to qualify for volume
discounts and reduces overhead costs.
(iii)
Improved control and management:
(a)
Centralised policies provide top-down information flow, standardising
decision-making and procurement activities.
(iii)
Improved control and management:
(a)
Centralised policies provide top-down information flow, standardising
decision-making and procurement activities.
(b) It
helps address ethical issues by outlining the position on accepting gifts,
identifying conflicts of interest, and maintaining confidentiality.
(iv) Lower
overhead costs:
(a)
Centralized purchasing reduces overhead costs associated with inventory
management, quality monitoring, risk analysis, and transportation.
(v) Better
vendor relationships:
(a)
Centralized purchasing enables the purchasing department to leverage volume
with suppliers, leading to better pricing and terms.
Disadvantages
of centralized purchasing:-
(i)
Standard process may lead to delays in procurement:
(a) There
may be delays in obtaining needed items in the early stages of developing
policies and procedures.
(b) Even
after policies are established, following standard procedures may lead to
delays.
(ii)
Mistaken purchases are possible:
(a)
Specific needs for individual items may not be successfully addressed, leading
to mismatched purchases.
(b) The
purchasing department may purchase items that the requesters cannot use.
(iii)
Procurement specialisation may not match company needs:
(a)
Procurement staff may not be experts in buying all the different types of
products and services the company needs.
(iv)
Employee morale may be adversely affected:
(a)
Empowering employees to make individual purchases can boost morale, but
centralised policies may lead to frustration as employees lose autonomy.
Situations
where centralised procurement does not make sense:-
(i) Unique
business unit needs:
(a) If
each business unit or location has different needs, centralising everything in
a single procurement department will not help.
(b) This
is especially true if there is limited overlap between suppliers or different
concentrations of procurement types.
(ii)
Limited or no overlap between suppliers:
(a) If
there is no overlap between suppliers, centralising procurement may not yield
significant cost savings.
(iii) Each
business unit has its own pros and cons:
(a) If
each business unit has its own pros and cons, consolidation may be difficult,
making centralized purchasing less effective.
Conclusion:-
Centralized
purchasing offers many advantages, including improved strategic efficiency,
procedural efficiency, improved control and management, lower overhead costs,
and better vendor relationships. However, it also has some disadvantages, such
as potential delays, incorrect purchases, and an adverse effect on employee
morale. Additionally, it may not be suitable for organizations that have
specific business unit needs or limited supplier overlap.
3. Write short notes on any two of the following: 5+5
[COMING SOON]
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