MATERIALS PROBLEM SHEET

1. The particulars relating to 1200 kgs of a certain raw material purchased by Krish Sales Corporation Ltd.
during March were as follows:
a) Lot prices quoted by supplier and accepted by the company for placing the purchase order:
Lot up to 1000 kgs @ ₹22 per kg.
Between 10001 – 1500 kgs @ ₹20 per kg.
Between 1501 – 2000 kgs @ ₹18 per kg.
b) Trade discount @ 20%.
c) Additional charges for containers @ ₹10 per drum of 25 kg.
d) Credit allowed on return of containers @ ₹8 per drum.
e) GST @ 10% on raw material and 5% on drums.
f) Total freight paid by the purchaser ₹218
g) Insurance at 2.5% (on Net Invoice Value) paid by the purchaser.
h) Stores overhead applied at 5% on total purchase cost of material (excluding stores overheads).
i) Units issued to production 600 kgs.
The containers are returned in the due course. Draw up a suitable statement to show (i) the total cost of material
purchased, (ii) the unit cost of material purchased and (iii) the total cost of material issued to production.
2. From the following information, calculate (a) Re-order Level, (b) Minimum Level, (c) Maximum Level,
(d) Average Stock Level, (e) Danger Level.
Rate of consumption: Minimum 250 kg per week, Maximum 750 kg per week, Normal 400 kg per week, re-
order period: Minimum 3 weeks, Maximum 7 weeks, Normal 4 weeks. For emergency purchase 2 weeks. Re-
order quantity: 2000 kg.
3. If the minimum stock level and average stock level of raw material D are 4,000 and 9,000 units respectively,
find out its ‘re-order quantity’.
4. ZEN is a product manufactured out of three raw materials, P, Q and R, respectively. ZEN requires 10 kg, 8
kg and 6 kg of P, Q and R respectively. The reorder levels of P and Q are 15,000 kg and 10,000 kg respectively,
while the minimum level of R is 2,500 kg. The weekly production of ZEN varies from 300 to 500 units, while
the weekly average production is 400 units. You are required to compute: (i) Minimum stock level of P; (ii)
Maximum stock level of Q, and (iii) Reorder level of R.
Data: P Q R
Reorder Quantity (in kg) 20,000 15,000 20,000
Reorder period (in weeks)
Minimum 2 4 3
Average 3 5 4
Maximum 4 6 5

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5. The Rangers Ltd. uses about 75,000 valves per year and the usage is fairly constant at 6,250 valves per
month. When bought in quantity, the valves cost ₹ 1.50 per unit and the carrying cost is estimated at 20% of
the average inventory investment on an annual basis. The cost to place an order and process the delivery is ₹
18. It takes 45 days to receive delivery from the date of order and a safety stock of 3,250 valves is desired.
You are to determine: (i) the most economic order quantity and the frequency of orders; (ii) the order point,
(iii) the most economic order quantity if the valves cost ₹ 4.50 instead of ₹ 1.50.
6. A company uses annually 50,000 units of an item each costing ₹ 1.20. Each order costs ₹ 45 to place and
carrying cost is 15% of the average inventory value.
Find: (i) EOQ, (ii) If the company operates 250 days a year, the procurement time is 10 days and safety stock
is 500 units. Find reorder level, maximum and minimum level.
7. Your factory buys and uses a component for production at ₹ 10 per piece. Annual requirement is 2,000
pieces. Carrying cost of inventory is 10% per annum and ordering cost is ₹ 40 per order. The purchase manager
proposes that as the ordering cost is very high, it is advantageous to place a single order for the entire annual
requirement. He also says that if we order 2,000 pieces at a time, we can get a 3% discount from the supplier.
You are required to evaluate this proposal and make your recommendation.
8. S Ltd. furnishes you the following information:
Consumption 300 units per quarter; (ii) Cost per unit ₹ 40; (iii) Cost of processing an order ₹ 600; (iv)
Obsolescence 15%; and (v) Insurance on inventory 25%
Compute: (a) Economic order quantity; (b) No. of orders; and (c) Time between two consecutive orders. A
supplier offers a discount of 2% on a purchase of 600 units. Should it be accepted?
9. For one of the bought-out items, the following are the relevant data:
Ordering Cost ₹ 500 Holding Cost 40%
Cost per item ₹ 100 Annual Demand 1,000 units
The Purchase Manager placed 5 orders of equal quantity in one year, in order to avail the discount of 5% on
the cost of the items. Work-out the gain or loss to the organization due to his ordering policy for this item.
10. The Purchase Department of your organization has received an offer for quantity discounts on its order of
materials as under:
The annual requirement is 5,000 tons. The delivery cost per order is ₹ 1,200 and the stock holding cost is
estimated at 20% of material cost per annum. You are required to advise the management about the most
economical purchase level.

Price per ton Tons

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11. The particulars of receipts and issues of material in a factory in August 2025, are as follows:
Aug. 1 Opening Balance 1,500 kg. @ ₹ 12.00 per kg
2 Issued 100 kg.
5 Purchased 400 kg. @ ₹ 12.60 per kg
9 Issued 300 kg.
10 Purchased 400 kg. @ ₹ 12.50 per kg
11 Issued 300 kg.
12 Returned from workshop (issued on 2nd August) 20 kg.
13 Issued 450 kg.
16 Purchased 500 kg. @ ₹ 13.00 per kg
23 Issued 400 kg.
30 Issued 200 kg.
Pricing of issues is to be done on FIFO basis. A shortage of 10 kg was noticed on 16th August. Prepare the
stores ledger account for the month of August, 2025 in respect of the material.
12. The following are the receipts and issues of stores Material Y in a manufacturing concern:
2025 July 1 Opening stock 100 units at ₹ 10 per unit.
2 Issued 25 units to Department A.
7 Received 425 units at ₹ 11 per unit.
10 Issued 200 units to Department B.
12 Returned to stores 10 units from Department A.
15 Returned to vendor 20 units out of the quantity received on 7th.
17 Received 110 units at ₹ 12.50 unit.
25 Received 100 units at ₹ 10 per unit.
29 Issued 200 units to Department B.
30 Received 100 units at ₹ 11 per unit.
Enter the above transactions in the stores ledger account of Material Y, using the weighted average cost
method. (Average cost to be calculated correct to two decimal places of a rupee).