Scribd
Upload
3 views29 pages

Chapter 2

The document outlines key concepts in inventory control, including reorder levels, economic order quantity, and classification of inventory items. It discusses the importance of maintaining optimal stock levels, the use of bills of materials across various departments, and methods for managing material costs. Additionally, it highlights inventory turnover ratios, perpetual inventory records, and the advantages of continuous stock verification.

Uploaded by

yusufsheik03
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF or read online on Scribd
3 views29 pages

Chapter 2

The document outlines key concepts in inventory control, including reorder levels, economic order quantity, and classification of inventory items. It discusses the importance of maintaining optimal stock levels, the use of bills of materials across various departments, and methods for managing material costs. Additionally, it highlights inventory turnover ratios, perpetual inventory records, and the advantages of continuous stock verification.

Uploaded by

yusufsheik03
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF or read online on Scribd
| MATERIAL COST 1. Inventory Control Levels: + Reorder Level (ROL): It js the level at which frosh order needs to be placed. ROL = Max. Consumption x Max. Re-order Period or Min. Stock Level + (Avg. Consumption x Average Re-order period) Or Safety Stock + Avg. lead time consumption Re-order period is also known as Lead Time. @ Re-order Quantity/Economic Order Quantity (ROQ/EOQ): Itis the: size of the order for which total ordering and total carrying, costs, are minimum. Baa [2xAnnual Requirement (A)x Cost per order(Q) Carrying cost per unit p.a(C) ¢@ Minimum Stock Level:-It is the ininimurm, quantity which ‘must. be]: retained in stock. = ROL- (Avg. Consumption « Average Re-order Period). Maximum Stock Level: Jvis the maximum limit up to which stock can] be stored at any time, = ROL'+,ROQ - (Min. Consumption x Min, Re-order Period) ¢@ Average Inventory Level: It is the quantity of [Link] normally, held in stock over a period. = Minimum Stock Level.+ 1/2 Re-order, Quantity OR Minimum Stoc! Maximum Stock Levi 7 2 ¢ Danger Level: The level where normal issue of materials is stopped and only emergency materials are issued, 21 22 ag. Consumalon® = Land time or emergency purchase Rone time minimum consumption i also used. 2 lasification of ems in AC Analysts: “a cateyorys Quan es than 10% but value more than 70% Jpcuegen: Ovantits ss than 20% but valve about 20% ‘Ceeategory Quanity about 7% ut sale les than 10" -tmventony Turnover Ratlo:isused formeasuing inventory performance, High menton turnover «Todicates that aera isa fast moving one, Lan uamover ratio ates over investment and locking up of working atl sents (Con of Materials Consumed Cost of Average Stock Average Stock «12 (opening sock losing sock) Inventory turnover Ratio ‘Gi. Suate the objectives of rstem of material control. [1CAT Module], Anvemory Turnover Ratio = avcrage No of day of Taventory holding = (92; Wha Io Wil of Material? Describe the uses of Bil of Material Im following departments ( Purchares Department Gi) Production Department Gi) Storer Department ‘CosvAccounting Department (CA Inter Dec. 2021, 5 Marks] ‘ans: It 2 detailed Ist specifying the Handard quantities and qualities of [Link] and componcne required for preducing a product OF caring out ‘of any job. ‘Uses of Dll of Material ‘Marketing| Production Sores | Cohccounting courehase) Deptt. | Dept Dest Dep Materials Proshcton Kisco [Rmmedto | rorhosed) sctondingto he |dcumcne white | Sn prof Any [Srtbebeseot [ota colame’ —|tesine metrae to] purchve au Srennine,, [ait | Cregg | Sab wc nessa | Secon soon ‘Sifencmnes that ne acum, particularly production, sullers from far, pion fr want uf materials and stores This requires Constant avallabiiy {fever hem neded nthe production process. ) Optimisation of Material Cost: The overall material costs includes price dering cons and holding cost Since all the materials and sores are Cguied st the lowest possible price considering the required quality and ster eat at ike ably in expt of deinen et, hong ost inet ge sn ot wrens of ect ee ae Sno nuestra nay stolen also facilitates proper production planning. ™ >) Camplin fdr ne: Proper mat managements ey {peg for fling order o the frm, Thi ads Co the Boodwil of the ‘05. Distingulah between Bll of Material and Material Requisition note, [CA Inter May 2012.4 Marks} ‘Ans: Dilflerences between Ill of Material and Material Requisition Note ‘Bil of Materia Material Requisition Nore eis complete scot a concn] ta dacment aking SOR Faniciarob or nork ore. Sipura : [Shidute of matertale requiced for Poca ab at can replace ater TeanbeuneorticpnpaoFquaion Ba suena cost GE With weament of Hes asta wih purchase of waaay sea) eee (a Qer eae abana nal ag apr Cash diecount Cash discount snot decd from the pea sent ay concent ecg “si Soar ueeoon cen ose spa ons cl ee ee ar Fone of eae eas core i Germain kre Pls Conmigo akg pad "OF Siate how the following items are treated In arriving at the valucgp, Sehr gaan a STI MANET Sy nie Choe cb oeanten fay oaior ewe Ss eer peel et () Shortage due to abnormal reasons. [CAIhteran.2021, Marks) ‘Ane: Testment of em in arising a the value of cost of matctial Purchesed ne It fer he ould mot form pat oe eh eee “QS, State how the following lems are treated In arviving atthe value of warenia cost 2s EL “Testment "| cena Goods — ena Gols and Services Tax (CGS is aid on cast) ee ech fm te cot of pane | Shore dae _— etre ye cong prota tm {on of material purchaceds (@ Trade discount Gi) Insurance charges Gi) Pretght inwards (Gv) Cost of nom returnable containers (@) Shortage due to normal reasons ICAL Module} cost nd mot lneluded wih cos f Parchane, in nang or lccing of nal Sinormal ont and nt laced wth cot of para Soe gamers the anu of fund on returning te conta Ike L hte amount pute, oly the sonal ed =] ime Treatment | trance caress ean. [Saran en, men, ooconame Tab | Posehn iad withthe contol purchase asin diss TG) | Gon of wowvetrnals The cost on ssturable container aie Fav” [ Stage dae to wrmal] Gos uni abso the cont of sRorage doe vo enone nal enone, Loses dc to breaking of bul ‘lamin, oa to a unvonsbl cons ‘OF. Distinguish clearly between Bin Corda and Stones Leds, Ted Inter Now 2017, Now 2004, Say 2008, ay 2002, May 2000, 4 Marks} Be eae Sane oem sem ed nd andre Lae cer a ODOT ET pis is gigas eal | Tandions Way be samara aad ig aay me See Tea Beslan Eno eigen eh Pee tae oe ee reerered Insitute of Management Accounts (CIMA) defines vey, | fom Control as “The function of ensuring that sufficient goods are retained ty 10, Con eject wou crying necessary lnge sock na Gi Define inventory contro aan ent only pause the prodtion but also cats lesson dps ‘nthcotherhand. ventory requtes some funds for purchase, slong mainte sant ctesnera wats Hskof ebsclescence plferape ete. A trade-all betwen, ‘ocicot and oerstoclng lsroqured. The management may ernpoy various Inch of inventors balance Management may adopt the following basis for Inventory Control: ‘By Seuing Qunttative Levels + On he ass of Relative Classification + Using Rati Anata sca contol (Explain ust in Time’ GFT) approach of inventory management a Pin ist Time’ GF) approach of inventory management, = TE FCA hner May 2018, 5 Marks}, Ane JT i 8 sien of fncnony management with an approach vo have ro mentors in tors According this approach mater ihe sents cally regi or poducon ns wn an rt tase on to pines Wi) Produce pads only when is equired nd i the prscts should be delivered 1 custome the want inate hnoxen ae "Demael pl or Pll tee proton proces etal start after th ENN pac onthe demand, production process tars Ter ane materials sen othe purchase department for push Le ee wa] Jose] lee ss atthe ime only when through’ system of poducton, fa this Wonder for the products are dhe euler Dio. Discuss ABC hnalyais ar a sstem of Taventory Control “TeA Ine May 2000, Nov. 2004, Now. 2005, May 2008, Nox 2011, May 2012. Marks) as 1 isan imporiany tchnigue of ventory control on selautive basis ‘om yh menurc af comirel enc an tern of nsetory varies with USE SHEEN tecoescroinator conta over difere tem of tres 2r0uP=d wa hestoftheiovcsimentincoved. Usually theitemsofmateralare grouped ha re cateporos Has A, B and C according to thir wae valve ding @ perio: (0) *& Category of tems consis of ona smal percentage £e.,about 10% FEU Sed toms of material handed by the stores But rule heany Ichiment tes about TOF of inventory vals because obelrhigh press and hea require (a “category of tm compeses of bout ‘Rover md by sue The percentage of neste et hou 20/2 he otal svestmen inventors (un *€-Category oftems docenst site mtch investment eay be abo Tossed oral inventory value fut they are nearly 70% of the toa em Iran by stoves {20% of the toa items of Gli What are the advantages OTAUCanalysia EAT Mose? ‘ans: ( Continutty in production: It ensures cat, without there being any Rane enti of podction for wat of materials oF =tres, rinimom reat ls nade Mt tnventoris a sone he con of ig odes sda main Aa Lowe ont TH ihe ete a couled with the dena bce pantties, nal see ele aspen ner sved since arent i teen eel terme athe than al the lem neo Ce ee ara! he aD vem, my tu Sma scam snenaion sans a ea Sedat a ee esng and par vag Tem of res We iE ow ee eared ch oka? oa She (csr Nn 200, ta ‘poring ems of stores can be detected in the ey ‘nx Siow mang and pon moe wos yy meparing & scanning periodic reports showing the st emetors oe toe the sock olngofvarious tems terms of numbersop Byes consumptionss a perentage. 5 Sremng atin pedal relating to the ses of avrage sack ra | Brinplenentng the use of well designed information system sepa toredace tek of slow mang and non-moving items of stores: Tropa recedes nd uilines should be laid down forthe ds Eile sce tcms, bee hy farther dteortce Inala 2. Dern in pedo wo use up noch materia 4. Goetise materia sbuttue in place of oer materials (O13. Write a short note on VED analysis of Inventory Control.) = ICA Inter July 2021, 5 Marks] pebsslnesaorechhdonthsbasot ier frtheprodcton roc ems undr tis caegay ae enous ph ts of dilfereg| The eney in production foically and get the second | sarenaccost 29 Desirable: lems under thiscatepory are optional in nature, unavailability does fpaveause any production or efficiency len ‘O14, Describe perpetual Inentory records and continuous stock verk feation. LCA tnter May 2001. 3 Marks} ‘ans: Perpetual Inventory Records Terpctal inventory represents system of records maintained by the stores epuriment i comprises of) Bin Cards and (a) Stores Ledger “The suceers of perpetual ventory depends upon the fellowing: (@) The Stores Ledger showing quantities and amount ofeach item. (@) Stock Control ead oe Bin Cards) (6) Reconcling the quantity balances shown by stores ledger and bia cards. (a) Checking the physical balances of a numberof fems every dav aystem- Scallyand by rotation (e) Explaining promply the cavsesofdeerepances. fan: between psical balances and the book figures. () Making corective entries wherever required and (@) Removing the causes of the discrepancies. ‘continuous Stock Verification: ‘The checking of physical inventory i an essential feature of every sound ‘tem of material control. The ysfemn of continuous stock taking consists of pinsiealverficationofitemsof inventory. Thestck verification may be done By mernal suit dopartment but are independent ofthe store and production It Stock verification te done at sppropmate interval of me without prior ‘otic, The clement of wurprne i stent for effective contol ofthe ste, G15. Discuss the advantages of perpetual Inventory records and contin ous sock verification. Ted tnt Now 2008, 4 Marks) ‘Ans: Advantages of Perpetual Inventory Recor 1. Physical stockscan be counted ant ook balances canbe adjustetas and “tne stocktaking #9 Be done. {when desired tout wating Fr th 2. Quick compilation of Profit and Lom Account for itera perio due to Prompt avalabilayof stock gues screpancics are eaily located and thas coitectine action can be promptly taken. istence of sues, dormant, obsolete and slow-moving stron may be tae In ine reveals the 0 material, so that remedial a0 suomi cosr 4. rain of hea ok ec checking of Tanith theseleveleasisthestoreeeperin mamas eames Timms and in siiating purchase requisitions for comectaaaeets cannes Contino Sack Taking Tce of nor econ nt a 2 peck dbcrepencle ae eyo be bong othe ue and Sth earer than under the annual stock-taking systems mt OPPSeg 4. Tem penn ar onoerng ene on toes sta Thcloneel spe pee ren ol sg 4. Tenor fotos ea an be vached moe eyo rr es aaa ae =. Final Accounts ean be ready quickly Interim accounts ae posse que oneness a armenian a ae eons me ee Sr riaraal cena oe ses ain u gaint or of tena is ood Ack eustenaerencis rapt ncr pan et Contenirnechlingmenstplpil cbcingenreorece Bes a ee Saray atc Snyper Sag Je needentnge ef cient kanya onion bachelor andere annual ck aking pon ot 4. The seme suoberinginlueceon the stores Title ota pect rt eens se {he moemento sors items canbe weed more ern tecanbe atcha mor cosy by thts 1d ‘that chances of obsolescence buying are reduced. ” 4 Fal Accounts can be ready quickly Interim accounts are possible quite uni a uatenia cost aan GIF. Fxplain FIFO and FIFO method of stores Issue: rae enn TCA iter Say 2018. 2:5 Marks] ‘jas: Fiestin Flstout (FIFO) methods Ics method of pricing the issues of ‘Rica inthe order nih they arepurchased: In oer words, the materials ‘eed nc ondsrinhich hoy ae the store or the fers Tongest ‘nove fst thas sath sue of material only reconers Whe DUrcase peice which doesnot reflect the current market price. issuable nines of fling price since the material cost eharged to proce Tn wil be high while the replacement cost of materia wil Be Tow But i see Frising prices If this metiod i adopted, the charge to production will highwhte the roplacement com of material will below. ‘consequent it would be dificult fo purchase the same volume of materials (oiNtte caren period ia future witout having additonal capital resouTe=s lLastin-Firstout (LIFO) method: It a method of pricing the issues of Interns on the esis of asurmption that the ers of the lst Batch (18) ‘chased arethe hat ibe eeued Therefor, under his method, the petes of The st batch (a are ned or pricing the han, unis exhausted. Where {Meaty of sue more tam th quota the Latest ot then earlier ot Sind is price will alse be tohen into consideration. During Inflationary prod or period of rising prices, the use of LIFO would ‘oe of production determin om the above Bass is help to ensure that th spsvoximtely the curent one “O18, Explain, why the Last ia Fist out (LIFO) fas an cdge over ‘Pres-inPint out (FEO) or any other method of pricing material issues. eh Incr Nov, 3002.3 Marks] ‘Ans LIFO bas following advantage: (a) The cost ofthe materialised willbe reecting the current market (0) The use of the method during the period of rising prices dows not reflect tse high pot inthe tncome sttemen (6) Inthe caso aling price, profit tend to ise de to lower material cost atthe finished goad appear ta be more competitive as are st market price During the perio of ination, LIPO wile te show the correct prot 019, Explain the meaning of waste, spotlage defectives and scrap and She the accounting treatment foreach one “fea Inter Now 2019, Nov. 2015, May 2009, Now, 2008, May 2007, Nay 2008 Now. 2003, lay 2003, May 2000, 8 Marks) an ennversin sh hs do se pct nh i cra ak ‘hecourting Tate ‘normal wasie is absorbed by good proc ‘Normal wastage: Cost of huction unity, ern ‘peg acne a ts Str posto watt erter poesig cr eo in ee pg ey shih enh she eperng Normal Spee: Norm evher by charging it to the production order ot ee nal pean irc ee ecaton er os ssan ee ea salige, ng cnn ‘Sorel se hr Sn ot oot her Nan tion heeon opal Sr ee eae ete Eon poe nan a ee lemiad ane Soe eet eemrsnaeey oa — Soren ape ta ate wi Sonus Lanatomsienectideem os eacaad such defectives and is transferred to costing profit and loss account. of sinatra dnp in me ory hn of cathe sian ro nla we is deducted from the cost. din i be charged with fal cost andthe races concer Te prof or lx i the sera rrsfere tothe Costing Profit ad Lane saceniat cose aus (920. Explain obsolescence and circumstances under which material ‘Deconie obsolete, sate the stepeto be takes for lls treatment. eA tnter Nov. 2018. 5 Marks] ‘heat Obsolescence fs the low in the intrinsic value of an asset due 10 is ‘Miperscsson, In other word, efor to the lon In the vali ofan asset det technologies advancements Materials may become obsolete under any of the following elrcumstances: ‘¢ when it is a spare part or component of a machinery used in Tnanufacture and thet machinery brome obsolete. «where vs used inthe manufacture ofa product which has now become Shalt ‘¢ where the material itself is replaced by another material de to either lrmprone qual oF fll in price " “Treatment: Ivall thee eases, the vale ofthe obsolete material eld ina stock Fra taal lon ad immediate step shouldbe taken ta dispose Wt of tthe best Sailable price, The los arsing out of obsolete materials an abnormal loss fini dace nt form part ofthe con of manufactur. “Gai, Dilferentiate between ‘serap’ and ‘defective? and how they are feated in cost accounting. {CA Inter Now. 2015, Now. 2008, # Marks} ‘Ans: Difference between Scrap and Defectives Geverlly sapere nt wed or rele | Delwines cntussdater ao Scrophavelnipnificaniecoverble val, | elvis rest slower ale oon thar ofthe po one “O23, State with reatons whether the following independa Sre tre or fale E (), Under LIFO method, i the period of falling prices, lower income: I teported and Income-tasHabllty x reduced Under VED analysis, inventories are classified on the basis of co ‘of innit items Git) Materia requisition note i prepared by the store keeper (i) ‘Simple average pricing method is suitable when quantity purch- cachet afferent and prices uctuate considers. = [Link] OM aa + Fin and Hon Teer ore wlnianed Ty he pasate, @ See iain Sass a aS TIF meted, in the peviod of fling prices ine) ane: (Unser lower eet incomestae habs rice "ower incomes | Fen der LIPO method in the period of ts Fae omen aby ced race VED anaes inventories are eased onthe bask of on Find Prices, lower income al es si VED (ta, Essential, and Desirable) analysis, inventories Fas ne Adon thei importance in the production revs an csi bse on rn ED sae hpen pioneers et Ie on ot pense elelent Inventory management sed on Pe anal equation notes prepared bythe stone keeper Fal requisition note pial prepared by the prod "Sh orckecper The note specifies ihe type and quate submitted fo the storekeeper for fulfiment 2 purchased unde Falke. U Fe Amat Pam nocd and ihe simple average pricing method is suitable when quant eon pices actuate conterably aie Thsmethod issuable when the materials are received in norm pis Tie quanti) and prices are donot fluctuate considerably. Bisco and store ledger are maintained by the purchasing department False in card afnaned by the storekceper in the store and sore ‘maintained sn cost accounting department. hedomi Seen ena : ‘Qi. SKD Company Ltd., not registered under GST, purchased material gig conn i cere a aera ied re one at £30,000 fe discount, 10% on Listed price COST and SOST (Celi Novae) 12 (6FeCGSTo68G8T) acount o10% (il be vem ony payment Is made within 30 days.) ee a pee ae cael aicost 21s ‘Goranson and brokerage On purchases ©2000 ‘Nrrount deposited for returnable containers 6,000 ncunt of refund on returning the container © 4,000 ther Expenses (2 of total cost {ore of material shortage is de to aor ent tothe suppller wos made within 20 days ofthe porchawes, rae ruined to calculate cont per unit of material purchased £0.57 ‘Tex Inter RIP May 2022) Soman een puny of ol cn of patel purchase 0 7 er “ 'SKD Company Ltd. Tr ea re Som dsm (0% ome re | soon as: Cost wt of 8.00 200 (a Sew oof a3000 |__ 370 0 st 100 | Pride ounce | S200 Coan an rks Fld 2ow a noe conn | Scum aeprted 86000 | [Exim retded — £5600 200) at: oter apes 24 of ol Con (32-38) 1200| aa cw of mal [a6 tants 0 unio os HD ats] tr (ORD) 1. GSTs payable on net price, sted price less dseount {Cash escount I rated a interest and finance charges an ence if 0 belgnored 4, Demmutrage is not tobe nck in cost of purchase 4 Shortage de t normal resaons should not be dete from cost an is forbeabsorbed by good units « ovo on00k QUANTITY 0) ; Semon ne = DP Ra Sebi ue FScajaeeend page | Sue 4 Dargo nerorder, £20, i “Siorze om ted pee Malf-month | pec oe uta otal ne itory conf cae “Tek rer Now 2019, Nor 2009, 4 Set eT is Ondeng Cos (0) = £20 Caryn 8 P= Sig zara) = E20« 8) te 00 = ue ott Anal inventory cst “al aie cot (28 xt20x100) “G3. W Compute OQ and the total cost forthe Following: Amal Demand Unk pce Obsolescence rate = 6f6 per annum Gover anna (6 2.0 020 em Storage cost + Interest cout} = 5,000 units 220.00 216.00 9 | “Taniieratne he Tora cont that would Feval forthe ema t# Rew price of £12.80 is weed Fass) Annual Demand (A) = 5,000 unite Gnderiny: Cont (0) = £16 Carrying cont pernit pa (ex . C{Srorae cnt (2%) + Int ont (12%) + Obsolescence cost (OH) = 2204 20% = 4per * [RAD _ [FZSGOO=ETE _ (99,500 = 200units 00 ‘otal Annual Inventory cos ‘Ronhanccot 6,000 uite® 2000) 1.00000 nding cox (52224416) 00 carping cou [202 4] ee loot Eon00 Gp ate new pic of 1280 Cone ore1280.-€256 por vaie ps 100 = BEES «280 unite ua Anal ventory ont Purchase cot (5,000 site 81280) 64000 Ordering cos (52226) — coring cost [32=4256] ee Tetalont seteio Gi. The demand fora certain product fa random. T has been estimated) Imonhly demand of he protet hana normal sition wth ‘of 390 unite The unit price of product Is? 28. Ordering cost t= {Elopper order and inventory sartying cont i catimated tobe 38 percent peryear Required: Calculate Heonomic Ont Quantity 200). . = "CA tater Now. 2007.2 Marks} siutation of Economie Once Quasi (EOO) [Monty demand «390 units, Anal deal (A) = 390% 12 = 4.680 unite ein arta cost “onlering cost (0) =€ 40 per onder {FEST ~ 206.85 0F 207 unis Se mina ae ge TPA RI Br TA ae ns Near ended 3ist March, 2021: re 200 - EASE Sealab for the annual demand of “SKY BLUE" 12.900 Unies Con of lacing an oder e100 (Coe pe ui of SKY BLUE" eo 4 rye cont perenne etn panbecn offered aquantty discount of Son then Thsseehy Ue provided the order size is 3,000 components aim Sou are regied fo: wp compat the Beonomie Order Quant eather the quantity acount offer can be septa. TA nar ay 2078 ary 72,000 units ‘as fal demand Ordering Cos (0) = £1,800 Cling cont pr uit per annum (x1) = € 640 x 18.75% =€ 120, i calculation of Economic Order Quantity: ao. PAROS 200.» (BB = EP covunis i) Evaluation of Profitability f Different Options of Order Quantity When BOQ ordered [When dicount of accepted and onder ze 3.000 nis Bo der units 0 wl) Noval eer BH zb0 20) R000 = 300) al Parchise | € 76ND G00 02000 kgs x € 640] € 72.9800 (12.000 ket] ea “ Tl erdrng ont | _€34000(8 1,800 «20 orders] £7,200 (1,800 4d) alearyingcost | £35000 (400 nite vt 40] €1.7,000(3,000 unt | ia7s| 8st 1850) featGea Tf 37.52.00 rar {4 assumed thatthe caerying cont varies duc to discount in ote: Melnurehose price Atermauchy nay be asumed that the cay HP coe Ber Unis ine snl dovs not sary duc to dicount sm purchase price. 1 sch cone tne Tal carne con for onder sive S000 nie shall be € 1 30.000 (3.000 Advices The total cost slower f Company accept an offer of $ discount by {helices The compan advised mt to accept the FOO, "OE, POR Limited produces n product which has » monthly demand of Sooo waite The product requires a component X which is purchased 115 per unl For every finished product, 2 units of Component X are fyi The Ordering conte € 340 per der an the carving con Required (@) Calculate the economic order quantity For component X. G1 the minimum lot sire to be supplied i $2,000 nits, what the extra cost, the company eas to near? (Gi) Whot isthe mantainn carrying cost, the Company has to incus? {ICA inter May 2006, 8 Starks]. 12 = 128,000 units ‘ans Anal demand (A) = 52,000 wits DOnloring Cont (0) = €350, CCrtyng cot por unk per anmum (ei) =€15 «1266-8 180 pao @ 0g - AS Gi) xtea coat incurred by the compa aaa =e] [Sire oh onder 52,000 unis 22:50 uns] tl oer cost Ti F1982750) xsso) | (S2000522 x20) Fuatcaryingeost | £46800 2.00 ase) ¢ 1952740 22030 | [Toscominecint [Fae ato ees ise] unuaetene 18 (39) sr cont curved = 55200 839 885- 220 yates Gy Mim eaeying cost HE CO 2 22080 5 «1206 € 1982750 pany as to Se RT RE, Aegan gee gma a alin og ‘isteaer Ape uasPhermm aon cova $0 ofr tan iin inventory of raw material is soningenial nase el proton the rect 1.0009 Mitrom one hg. of raw material SEAS Som are tans ewe cod ethe conocer quant fae ; urement be placed, ‘ho frequently should orders for proc er to rationalise placement of orders on - wat in the peice of ray i) asin, Git) be company is i a aia way perentage of de SESE hound be negotiated? Assume 360 days in year Fe Inter: Tafa material kg (A) = 100000725 unis pers ‘ans Anal eure Ondine Cost (Hanng& eight cos) (0) CCnying cont per ait per annum 3) 360 + €390 27750 = lnvenorycaryingeosts working capital cst = 05 12 months) «29 = E15 perks. (4 Frequency of orders for procurement: Frequency pacing orders tin days) «2008 Ag days aren cosr zat ii) Percentage ofulscountin the price of raw materials to be negotiated: Be of ie der sont aes ostcamingcet | esto doom ie in| 1590000 "Foal Com 73.000, = 30,000) Mereae in otal cow i quareranler are placed = ¥ EDD & 30.000 EeSR00 " ene elustionexpeited in purchase Ines intl cont Prieta hs)" ~ Rape rprement E4400 e120 "Os. The nna carrying cos of material Ws €3.6 por unit and Ne total eareying cost Is 9,600 per annum. What would be tae Economic onder “quantity for material 'X, there is no eaety stock of material 2 ICA tmter Nov. 2008, 2 Marks} Ans: Ft Carrying Gos at OO level « EO Canying cow por unit 9.000 = £29 e360 OQ = 9,000 «2) +£3.60 «5,000 units ‘03. HE Limited produces product ‘Mf which has a quarterly demand ‘020,000 units, Each product requires 3k. and # kg. of material X and Y respeetively. Material % is supplied by a local supplier snd cam be procured a factory stores at anytime, hence, no need to keep inventory Tor material X. The material ¥ not locally available, Ie requires to be Purchased from othcrstatesinaspecially designed truck container with ‘eapaclty of 10 tons. ed with the materials are as 2a ae hae ee cng a Rate OST gaed, respecte of quantity) | + ed gn fe ap Se ett pascr oman ‘Required: a “Oy calculate cost per ke of material X and ‘Ane Annual demand for product le Order quantity for both the materials Calculate the Economle Ord « {ICA Inter Nov. 2019, ip} 30/000 units = 4 = 80,000 units Se pa. to bank for cash credit Feiiy, 2a Of Economic Order Quantity (EOQ) for Matertal Beat, aera Raval Raper 250000Ke | SAkO8S 20. For Material & As the ordering costs, £00 cannot be define For Material ¥ Strate () Calculation of cost per kg. of Materfal X and Ys neal iat as T=0000hr ata acne 129 ta Poche pee Taonnos] Eee ist rece ° ‘oan atcon Tasman] —— ean oH Seowanay 2anooie| 32000048 Nn ofiaca» PIES = Haoidsor 3S meh ‘Therefore ttl frei 35 tucks 26,500 7 9,80,000 ‘Calculation of Annal purchase quantity 00 = ERIE 655 ing ‘Material x_[ Mace Mi [Gran eels eran prod She ‘ie (010, KE Limited produces product'AT which has a quarterly demandoP Retquansy ormoteras ee 2a0000Ks-| — 32000016| £8,000 units. The Product requires 3kgs. quantity of ateral X fer every Peale ake finished unit of product. The other information vec tole at Lain pres 1o000%| _1720444| Cost of material X" 20per ks. Purine gant Tsoaone| te ‘Cost of placing an order © 1,000 per onder Now tion GSTpaidisavallabloand therefore itwillnot befacludedincon | Garting cont 18% per annum of avernge invent T1Con GST pad comin ory (@) Calculate the Economie Onder Quantity for material () Should the company acceptan offer of2% discount by the supplier, ithe wants to supply the smual requircinent of material ‘equal quarterly instalments? per quarter <4 quartersina year 3hg forevery finished product, = 96.000 kes Oniering Cost (0) = € 1,000 Carving cos per unit per aman (€ 1) £20 18% = 83 (@ Caleulation of E00 for material: nog = (29 « EPEEEY «ontes cost under different options of ‘order quantity’, When discount of itp sccepid and sy 25,000 (96.000 8.00 «2400 18.51.00 (56, 0390 ei85 £4,000 1.0004 orden) 1192000096. 00015 remumnecns | #7200020 12 sconyncrine| 1383804000 ante, atcamine ont €1200018 000 855 5 25 Tenis ‘ ae neal Se aa gel cers Mores eos 18%) a Tegal instalments ee ETT sheng anaes : ae manonon a wis | =a Sy : icyucc 30 days consumption. ls | — Shutter {Canying cost per unt per anna fe 124% «2024 (0 novertog - (2% Sse stock» Non ed tine consumption 4g a0), (1315) 100 «09-1500 nis it) tnventory level required Immediately before the material ordered inrecelved hes safey stock ROL saety Stock = (2422530) «1.00 uns (G12. Anc Limited has received an olferof quantity dscountsoalisonder ‘of materials ns under Price per one Tames S80 so and eas than 100 3560 100 and en than 200 a0 200 and Jee than 300 3320 300 and above ‘The annual requirement for the mateval is 500 tonnes The ordering cost per order is € 6,280 and the stock holding is eatimated at 25% of, the material cost per anmam, Required: (1) Compute the most economical purchase level (2) Compute £00 if there are no quantity discounts andthe price per tonne ts 5.280, TEA Inter Nov. 2010, Now. 2004, 3 Marks) Ans: @ Calculation of most economical purchase level: ‘A= Anal eiement = 500 tonne, Yoretor | Gotan | Onde | Geaiae | Tahoe Nookea | Smctdse | eckane | en. | ieee TO | Scere | Geez) | rsa) | sein | oid, [carmay,| GER [eto8. | easouns 226 sac [Sawer] Conatpon | Onierng | Cangine Orie [Neal ceo] Cestce | coerce | Tape WH [TON | Siecner | 628) | (Seosan} | oe ‘on 50 | iby | iaostesm | cos Fett |"Preecoxons] €2431759 so | t2ssoom | £31280 we | cedfen | deostsan | staat rua 200 | cgoheo | 0's 840 | 2.586250) | Watsons] 248605 Tioai7s0 | Erez taisoae 0 COTE [Psa ar0n025] € 23.32.97: [sm | it feo] 5 | P ran Salat tame} ie [3 fos for | a [asm aTERIAL cost 235 Wine Ne product. at woh ete Yotlncng goantens {@ Minn Stock ff? Ai Maatum Stock of 8? i) Reader level of C7 {i Averge stock eve fA? (@) Recorder evel of D? (61) Miniui Stosk eve D> ae Mints ck of Rewnlrlevel- (ergs consumption «nem time required tobain SSivews 60,00. 600 rs 12 a = 3 weeks) = 27600 i Maximum sock f Rooerleve + Reo nity (Mn, Consumption x Min. Reorder ro) 70.000. + 8.000 (S50 units x8 hex 5 weeks Trx0o0- 22000» $6.00 Aun Reorder level of€ Mavi re-order pin Maxims Uses weet (12206 hp) = 2500p Minima tock fC erage consumption x Average deter tine) S00 p+ [600 yntexop) «Sneha = 52.5008 (i) Average mock level of A + Minin stock» Masiam sok? 1 200 588002 = $3,200 Working note Mori steckotA=RoL + RoO (Minima consmtion Minima reoncr pera Noo be 12.0004 -(s0unis 12) <2 osha = S88004e. ieconter eve of Natmam reer pro Mss Use MS Meeke nto es She) = 1875088 ICA Inter Now. 2020, RTP]. «7 jock evel of D 2) Minimum average consumption = Average ime required oo ra Reonderle| Sunes (ooo units $ he. *2 Weeks) = 9750 he. [onsen eel [es sect tet RT stimu fad time and Maximum Tad calcalte p Maximum consumption per day Go Minima consumption pt ay cin i iT ae Gir ferceen Minin lead me and Maimum kad time = day Mee bd ume Min ead time = 4 dan Oe Mas led ie » tin Head ime 4 days__( Sess ead te ese as 6 dae. Le ‘enna in ends «gd a Ponting the ale of ia) ‘Mow ead ime = 4 dye Mn. Nea ime bass ‘Oe ia. ead tne «4 day «Min. Tea time » 12 days (062 Mined ine = 8 a8 (Mia ed tine = 4 an “helre. Maimum lod time = days «4 days «8 days (© Stamm consumption per day: Comurpton pray 0c asim Campton per day = 4601009 26,000 units ii) Minimum Consumption per day: Ee eee pa aatomobile Company parchaaes27,000 spare pari fori annual Cer penta Tv cot por order is 290 andthe anual caring cost Tyaegennentory fe Esse Bach spore pert conte 30. present the order size 3,000 spare pars. ame that number of days fa year = 360 days) Find out: (@) How much the company’s cort would be saved by opting EOO ‘model? ie) The Reorder polat under FOO model iflead time is 12 days. iti) How frequently should orders for procurement be placed under E00 model” ICA Inter Now. 2020, 8 Marks} ‘ans Anal demand (A) = 27.000 spare pars ‘Ondcrns Cost (0) = €230 (Caring cor per unit per annum (¢x1) = £50 «12.5664 8625 EERE < to pare pars (@ Caleulation of saving by opting FOO: 00 sing Ode psy [00a] Resfones [ram aan | —TaSer 9 G70Ns170)| sire Cs 0 “0 E eoxtso| aro 144-201 ving Taste] ease Eso un _—— = ‘Savings of Cost by opting EOQ Model = £11535-€ 9,000 = € 2535 aa arERIALcost (do Reorder point under EOO: ROL» Navini consumption x Maximum lad ime Consumption por day = 27.000 + 360 days = 75 units, ROL: 7S units» 12 days = 900 units i) Frequency of Order (in days) sb days +19 = 1695.0 19 days ‘S22 Minimum Usage 80 kg. per hour; einimum reorder pera “hours inthe factory Is Shours. You are requinea so i terecader eel of taterial Xs [CA Inter May 2070, Sas Reorder level « Reorder Min: Reorder Peviod) “= Masimum Level -[Re-order Quantiy- Recorder Period) = 5.00 ke. 15,000 bg. (400 ke day) = 8000. - 3400 be = 4,600 ke. Hence, Reorder eve 1400 he ‘Minimum usage er day = SO. 0 days + [Link] oers per Seay 2 tas ‘Ans Maximum Level Quantity = (Mi. ussgee Reorder Level (Ain. usage ig hours = 400 ke, [Wis Prine ined produces product Ft weesaraally ‘tamateral Rex coving 10 peru. Other clevane nfornaee tation are on of pacing wn order R00 per onder | caring con 18% per annum of average inventory Reorder prod 10 asye safety ack 600 ite “he company operates 300 dysin a year tov are rege a cleat (0 Economic Order Quan (G) Reorder Level iy tsi Stock ep slit mera Lee CA Iter Nov. 2013, § Marks, neXt dena) 66009 for material ‘Rew. (Comings pe ni Pst annum (8) = 10x 15% atexaLcost iy Pconomle Order Quantity (E00) 00 ERR - 2000 nie 12 Safey Stock + {Normal daily Usage = Re- frder period = 600 units = [(60,000 units + 300 days) = 10 Sass] = 2,600 units (ity Maximum stock level_ = E00 (Reorder Quantity) « Safety Sok 8.000 units «400 units = 8.600 unite 1 (tinimmum lvel* + Maximum leveD #2 = (600 units «8.600 units) = 2 24,600, sinimam Level = Safety stock level «600 units “Qa4, MAT L1d. uses 7500 valves per month which fs purchased at a price (S150 per unit. The earrying cost i extimated to be 20% of average Itventory investment on an antual basis. The cost toplace an order ad friing the delivery fs C15. It takes a period of 1.5 months to receive a Selivery from the date of placing an order and a safety stock of 3200 ales ie erred ‘You are required to determine: (The Economic Order Quantity (E00) and the frequency of orders. (Gi) The reorder point. (ii) Twe Economie Order Quantity (EO) i the vale costs€ 4.50 each, Instead of £1.50 cach, (Assume a year consists of 360 days) i) Reorder Level (i) Average stock level [Now. 2022, Marks 5) Ins Rnwal Requirement = 7500 x 1 onthe = 90,000 wits Orderingcnt = 815 {Carrying cont = £0.3 (Stunt «20% eer § 2 (© Caleuation of Eeonomic Order Quantity woo (240 a ‘arent cost a = 5.000 Unis Freqicrey fonder = 2010 = 30 times ‘E00 when purchase costs 4.5 cach instead of 81.5 each, FA0, 00 - 222 TERE «rayne + Cabsulation of earying cost 520% of 4.5 Calclationof Re-Order Point «Safety sock «Average lead time consumption « wn 3200. Sate,» 45days] Das, ACE Ui. produces» product ENA aning a material ER Sresuce onc unl of EMAL O80 Kg of REX’ vequred, Ac por trea) Fees conde y the company iil beset se 400 i prodoct Ena inte coming seas There lan opening stocker Sa) Sela pact EMM snd company dees to mainte eonse So ‘aun to one months foresaniad sale: Following the tales Sort ie AEN ; Pci pe or Iowa pening sok of matral IRB 10% more than openting a Saaearee ‘Requires {Compute the £00 and total cos per 200, Gy Compute the re-order Tevel and maximum fevel (GiC the company places an order of 7,500 kg. of REX ata time, I gets srt discount, should the olfer be accepted? TCA Inter Stay 2019. 8 Marks} Jaw Computation of FOO: [P= Ann denn a REN OMISRE SO 200 + Saeco __ eaioneea Yess 0 = (FRE ste 37210 32210 «1525 orders ‘Total cost ax per LOO: [Link] orders = Macrl puchane sow 35> F7aTO RS as caig son (242-3) rato io Computation of Reorder vel & Maximum love ower lel (el) = Max nase ead ine ~isotg = tee SO Maximum lee Rol. + Re-rer Quantity (£00) ~ (in usage «Min. od time) 1.680 kg. + 2.440 hg. (00 hy = Says) 4090450 = 3640s. Giiyavalysis oF Offer at order evel of 7,50 ye woofers = (S222) «196 Total ost at 7,500 order level 2a arent cost juoceou it 8-08) = TONGS) | Aerator 24+ 8 snd ©. 204) hors Se ag F800 Up ot Hime the company aves © 13709 UG, MENCEatehy ences be company should accep the ole Sian 380 ordre Working Notes 1. [Link] pdaction unite of product FAM: eNotes + Cloning stock - Opening stock 2 asea0 » 80-150 45400 «3.800 2.180» 46.280 units of EMM iy of REX to he purchased 2. van roced ni of HEX ried prdce one unit of EM osig ASE Ching Sorbo REX 2310 yay ol REX oe a zoe hon of Lead ness ‘Mos led tine +n. lead time Mex teal = dass Average Lead time (Or Max. + Min. ead ine = 46 days “ ‘And Nas Min, ead ine = days given) i) Song th the equations Mae + Min led time = 16 Mac Min Jeadtime 26 2Ainkead tine = 10 Minium fad tne «5 days and Maxima leadtime = $+ 6 11 days Maren cost 28 gai Rane Ag Pe ttc manofactures a product ‘AMS using material “CEE A folowlng Information Is available regarding material CEE! nase price per unt iam Teirof placing an order ae ipin cost per unit per annum (that porchase price Consumption of material"CEE*perannum 194,400 unite esate atioum consuimptlon of material ‘CEE! per day fe 200 hg more than, erage consumption perday. Required {atta the following ln relation to matevtal ‘CEE: if) Beonomle Order Quantity. i Reorder Level (id Maximum Stock Level {on 2023, 5 stars “dssure 360daysinayeae) es (@ Calevlation of FOO ‘As Animal requirement = 18,00 units (0+ Ondering cost per order =€ 150 {C= Canyng cost por unit per annum = 8 300% 6° = (i) Reorder level = Maximum consumption » Mas. time (verage consumption day + 200 hp)» Sav = (540g +200 hg) 8 days = 5920ks ASO 8 10g “= Re-onlerovel + Rooter quantity = {inimaa consumption x Min. ea tie) S920 gs +1800 kgs CHD kgs 4 dass) 2 6360 8es rage consumption day = (Wo Staion stock level 2a srsitcost aa us oo : is orgs me aa a NTRS (Min consumption) "= 5402-740 in nice entole, 2 Coarse Dissent Aine nnn edie /ENTORY TURNOVER adel is 10days in Gomparnonto'A te bo ays Dilferent busines RUTETTORE TORIC PERE fas their own expected rates for inventory turnover ike food shops hase ITT ocr typeof matcher ie ern fog enorre Bintngprstsr ech 38 Panicle ‘Materia A) | Matera opening eck as on 01-082020 30,000 "3,000 orchase daring the year 90,000 ‘1,000 Closing stock ston 31-03-2021 20000 14,000 (You are required to calculate: (a) The inventory tamover rato of ‘Material Wand ‘Material BY, (2) The mumber of days for which the average Inventory i held for Bh inateriale X and (iy Based on above calculations, advice which ofthe two materials is fact moving. Assume 360 days na year) [cA inter Dec. 2021, May 2018, 5 Marks) () Calculation of inventory Turover Ratio and number of days Merit Opie Sak a rr) ew Cloning Stock eiissd Matera Canamed a Opening Cling Stock) = 20003 £14,000 + Rveragelnsemny = 3000 {Ratineenion tumover shop sellineturnitareetewilfRavestower inventory farnovet ile manufactures of Lge items of pant will Rave ery Tone Iitisnotas per the Industry Standard, then a slow turnover may indicate hot excessive Inventory Ts held and rick of obsolete or apoio iventory (Siicrease. Large quant of soe moving materal means that capital {locked wp in busines and not earning revenue It is adv able to ake ‘roperinvestigatonsintoslosemovingmateriieand akestepstomninize fee Stes hereto a my pt oer cia ah ote “Gis. The quarterly production ofa company'sproduct whichhasasteady Geriet is 20,000 unite. Each unit of a product requires 0.5 kg. of raw ‘Bateial The coat of placing one order for raw material in 100 and the [ventory earying cost ist 2 per annum. The lea time for procurement straw material is 86 days nd asafety stock of 1,000 kg. of raw materials {maintained by the company. The company has been able to negotiate the following discount structure withthe raw snaterial supplier ‘Onder quant (ke) Discount ‘01-000 200 ‘5001 -16,000 2.000 16901-30000 Sano 3001 -43,000 ‘$000 ou are required t () Calculate the re-order point taking 30 days ina month, i) Prepare a statement showing the total cost of procurement and Storage of raw material after considering the discount ofthe com- pay elects to place one, two, four or sic orders inthe yea i) State the number of orders which the company should place to infec the costs alice taking LOO also info consideration. TCA inter Atay 2002, 8 Marks] ay areRIAL cost sm: pasos 20.00 HFA any fool ‘requirement of the raw material (A) (80,000 units « 0.5 kg. per oooh Pern Ordering Gon (0) = 100 ooning cope pram (©=1)=€2 £00 = EE - 2000s Total Con at £00 eve: ‘denne Cnt (40000 +2000) «€ 100) £2000 Caring Got (2000+ 2) 282) £2,000 (Reorder level or point= Safety stock + Lead ime consumption F = 1,000 hg, + [40,000 + 360 days)» 36 days} £1000 bg « 4.00043. = 5:00 ks i Statement showing the totaleost of procurement and storage ofa materials (Oriersue] Sat | Total | merge | Toul | bin Theb Od | Goden | onferieg | stocks) | camiog | count "oy" | cou | (pst) | conte | ED Seti eet tivo e “ouoa] i] 100] 20.000) so 000] x00] 20m] | 200] 1000] 20.00)" 3.200 Git) Numer of orders which the company should place to minlaae te Si er ling EDO so coadcenton ie tbondas tok of oh Hobie Teale cf pcan and ope mines eae Een thc minnae [Link] cost (029. 1. 7 (EERE pe al eng aoe ais ated prot car arn fm afew P11 purchases 3000 ease 2az Tg a mad Hay esate Fo a Ts fie crtats Sunstmeergea tne he tadoany cation a Presa omens so ran eset aban 30519 ry ca 00 Renin es ea ae ote os WS peed te Keep the castings in crctally controlled temperature and the nity condivons, and fram the high cost of invaracce- Delivery from the foundry generally takes 6 days, but team take a8 Poach 10. ees ie aps) -[77s[s] © Percentage of currence [fs ts 1 Required: “Compute the Economic Order Quantity (E00). ii) Azsume the company s willing to assume a 15% risk of belng out GF etock: What would be the safety stack? The re-order point? Gi) Assume the company is willing to assume a 8% risk of being Out Sfstock. What would be the safety stock? The re-order point? (Go) Assume Seatock out risk. What would be the total cost ofordering iia coreyng inventory for one you (9) Refertotheoriginaldats, Assume that using process re-engineering the company reduces Hs cont of placing a purchase order to only £600. tn addition, company estimates that when tbe waste and Inefficiency caused by inventories are considered, the true cost of caning a tit instock ie € 120 por year {a) Compute the new EO@ (2) How frequently would the company be placing an oner as compared to the old purchasing polley? CA Inter May 2008, 9 Marks () Computation of Economie Order Quantity (EOO) (A = Annual Usage 54,000 (0 = Ordering cost per order =£9.000 +1300 (© = Carrying com per unit nat 00 castings i) Safety Stock (Assuming #156 sk of being ou of stock) See Seton onedan = 600360 days «150 castings. inn tock evel» (vera ed ime Ae " ee So se ee etn ont face Fonte amenen meebroe mmr eer 200 « Es ster ote elu yn l Berra 0 Gtonoan = 300 castings sreaicone 2 [pate t eset “Teves Balance = ee ee oe fee ee La sf | = = [fl ssl a ae ae Sap | 2 =| ‘s0| 5.50) rt oF MATERIAL ISSUES % slp a ‘i re Sir Tar Azote Toonng rans o a reba st or as q ‘| TE opnmg te 0 sls 10 pron | ito =| |S. Receipt 250 units costing 2,000 q 7 199} 0) ees tcnig 8 | x 1 Men son cing 0 a" 2 onset | a B Retna cane 58 j Spy aS “The issues upto 10421 willbe priced at LIFO and from sf of ibe age ne eed tro and rom 1-421 ee) 4 4 Stel be charged ax oven ICA Inter May 2011, 5 Marks] Gish alwngar the dcalsoclpsal aac fmne ESE Amana Stata thc mrt Ape 32 Tac Sek bn a | ite ‘Guanty | Rare sin Sa aca Cd ft) ‘Reorder eve - ‘Apel 4 | Purchase 3,000) T16 | neue itt _[tawe ten ast 20 pure cost wae i ‘ar | Basen ap stores Leet Account forthe month of Ap 202 (LIF) vies | car ‘apati20 [tee 1.200 = {i ts | sae |" Aptl2s | Rear rere of prcane "eo raf ‘I ao nosrarana vt a ted Apri |e +000 4 : sel ‘April 26 |rurchae soo] ny sat | my omy veel es ‘Opening nck a on OFONI0RT ADOT OTS pers. — a 228 Onan pe, est nas found that Og. of material CXE' was fraud ie yest At 2021 ae tre sean aed never recovered by tothe HE the Compan mast ‘ay Ses Require ae Gd Prepare astoreldgeracountundercachofthefllowog method mn] | a ar | of pcg the ue i an] Ta] apa et a (a) Weighted Average Method ¥ tal 130 uro ’ an a or be Gi) Whatwouldbethevalueofmaterialconsumedand valueofelosing| 15 {SS Modano ante per here wo methods? | 7 et Hed ct Yr Hay 2019, 10 Marks) van ‘a oe & Stites Kms rt mth of Ae 2 (ay ae of Naver Consumed and the vale of Cling Stock ‘sere te 5 Teiaied pare | HPO mata mated és c= ase ine) rig ck os 9 OT Troon] 50 oe [ea Pe ae sl | ee cine seo] ase eT al ind ancl J | ie] a sz enn oaseer sm] 5am wet vocal nal ct) 2 tes Abnormal oa 0 eT] sal | vee a Tes: lsing Sack on some] 3009 i si) mua] | | | aa] soo] rar Soto |oen 120} 13] sono] 10) sa) sua oe oneal Coase sasno| sae eel of fie | mel tel a al san! ne Sioa ap acrpoedarcopcompenrbaekin sl o| aan] 20] ess] sar “Weettovatttsengagedincresting Embedded progocte anditernet soar wl | 2800) teas}, 41,200 ‘of Things (loT) solutions for the Industrial market. tis focused on Inno- of sal wal lion sam ie dexeopment of preduetsand erecs. Oe wy is LogMax, a System on Atodule (SoM) Carrier 292 uate cost aR Ey areas nae erica nance aorenace Sorte eaten tannin pcre RD La oR a i erence ed the designated assembling process have been extenctd or the ‘month of September 2021: ing tsk of 00 units OF 285 per wal ‘Sep | eur #¢7Suntstomechanlcaldhlonvie material ula perteniast ‘Receinrd17£00 wits © P76 per unl ie purchase order wm} ord 12,00 mceehorate Sep 2 | Returned to saver 3595 wala by echnical dist ops uel equon po. Teh O1220 Sep FF | Received 900 wnt © € 288 per units vide parcase onder na Sep 17 | Retwrocd io supple 700 ult out of quanto reeched vide pas “ER0_| Ind 9500 unto techalcaldvson vide material requisition itechalcaldison vide material requsion ihe stock manager ofthe company expressed ‘eave for his hometown duc to certain contingency nd immedne Je he Job tame dy. ater, he ale svtched hs ‘stb company hasshe tendency of stocktaking everyendof the mont check and report forthe loss dae to rusting of the components the ‘Rew sock mansger on 30th Seplember, 2021, found that 900 unl of lro-contrulersucreinising whith i i “asapparently sapproprated bythe former suck manager. Ne, further reported loss of 300 nls eto roting of the component From the above faformatl the above information you are required to prepare the Stock Aglter account using “Weighted Average” method of valuing. the aaa CAT Module) MATERIAL cost 253 ior Ledger of inbros India Lu. (Weighted Average Method) ec a aa ae, | eee [em] [Hae | ae | ar | ates | Peet | ret | es | Mee | rer | ae | Me | ‘Norma lows of 90 uns sw be tance wo Costing Profit & Lows Ne ‘Norma ow of 300 units to he absorb by pad units Gis: Ais. NVZ Traders iva distributor ofan electronic calculator ApS tule Inventory of electron calculator on hand is taken when books are ‘dosed at the end ofeach quarter The following suinmay of information [Savallable forthe quarter ened on 30th September 2021; Sales 1,46,20,000 Opening Stock 25,000 calculator © € 200 pee Ssiculator [Administrative Expentes £3,25,000 Porchases (Including fright Inward), July 1, 2021 25,000 calculator @€ 210 per ‘aleulator 32,000 calculator + September 30, 2021 Closing stock: September 80, 2021 You are required to compte the followin Method), FIFO method ard LIEO method. {i) Naluc of Inventory on 0h September, 2021. {profit or toss forthe quarter ened on 30th September, 2021, Ica bby WAM (Weighted Avernge sweet cost 235 ase Ans ee {oy Computation o Vale af mentor ao 3th September 2212 ce =e [one ee | HF® | FoR me | ere [errs fop smn Sonne HT Ste] | fase [roe Gee een ce SO] I a} Ss0001 ‘35.000) 00) sear 3t | See Ruston 3.000 | E jam ae) el fata |e re | dom] aso ‘core iors] cic aeaam] ftoanat [sae nequtinanz | "Soo| | 50900) samt) on {Sor2t | GRN.009 (against the Parchase Order-009) | 10,000 -| raa0921 [Por | 25.000 [ $2,50.000] 32,50,000) +52.50,000] |j2o01-21 | MRN-00 (against the Purchase Order. 009) 400 | +] | 210" 210%) Trott | afaeral Requisition O13 pl ¢| 25000 25000) 21 | Material Requistion-018 a al Ta [eco Tatoo] TN] ——TaRaTa| || grat |oR-o10 aan he Pras Orden 010) | 1000) = c= Cisse] 300-2500 +e) @210-25000-e| | |eorat tae es = [| son) Ast s3000)] 191 3.00 [Link] [Material Requisiton-016 azo] zi sarge [OH Somme] eam] stam) | ea ec Na A a Rowand Sai ud on the above data, you are eqred to cleat Tsopngo0 + £ 9580000 + € 5250000 Weighed ere re een oD 2 3500 i) Computation of Profit or Loss for the Quarter énded on 30th Septe. ber 2021 ee LT 1.4820,00) 1.4620,000) 162600 Lee Common 1.344000] 13213000) 1.346000 Tes minis 3.75000/ 37000] 3.75000 'Note: tis assumed thet the Issue/consuumption pattern was even throughout tga i "GRE, Arse Blecironles manufactures clecironie ome appliances] follows weighted average Cost method for Inventory valuation, Following are the data of component X: vaste | ai T5120 Purchase Oder Top00 9330 son21 rm one) 10,000 | 31 10960] ) Reorder evel Gi) Maximum stock level ii) Minirnum stock evel (és) Prepare Store Ledger forthe period January, 2021 and determine {he value of stock as on 31012021. (}) Value of components ued during the month of January, 2021. (sf) nventorytarmoverratio. ___[CA Ter May 2020, TP). Workings: Consumption is calculated on the basis of material requisitions: Mavitnum component usage=4, 500 units (Material requisition on 10-01-2021) Minimum component sage = 1500 unit (Maeva requisition on 2-01-2021) eal inc isealeutate from purchase order date tomaterial received date days (15-12.2020 10 05:01-2021) 14 days (80-12.2020 10 1501-2021) Maxi ea tiene Minin ead ine Caleulatior () Reorder level = Masia sage x Manimuum fo ine = 4.00 units «21 days = 94,500 its 2.56 MATERIAL COST (ii) Maximum stock level = Re-order level + Re-order Quantity = 94,500 units + 10,000 units - (1,500 units x 14 days) ,04,500 units - 21,000 units = 83,500 units - (Min. Usage * Min. lead time) Gi), Minimum stock level = Re-order level - (Avg. consumption x Avg. lead time) = 94,500 units - (3,000 units 17.5 days) 94,500 units - 52,500 units 2,000 units (ivy Store Ledger for the month of January 2020: Date Receipts Tesue Balance GaNI | Units ] Rare | Amt | GRN/] Unite | Rate | Amt | Units ] Rate | Ame sme | | MRN « ean 000) 000) ma pop ~ |_| _-_| 300 | 9st0] saa 121} eos} 10000 | 9930 [92.300 | 03 | 500 | 9.930 | 4.965 | 13,000 | 9.898 | 1.28670) car} [ot 3.000 [9.898 [29.695 | 10.000 | 9,898 | 98.980 ror | P= | o12 | 4.500 [9.898 [asa | 5.500 | 9.898 S839 j20121| 009 | 10,000 | 9,780 | 97,800 | 004 | 400 | 9,780 | 3,912 | 15.100 | 9.823 | 1.48327 is.o12i | - - : ~ | 013 | 2,200 | 9.823 | 21,611 | 12,900 [ 9,823 | 1,26.716 20121] : = ~_|_o14_| 1,500 | 9,823 | 14.734 | 11,400 | 9.823 | 1.11982 25.0121 | 010 | 10,000 | 9.750 | 97.500] - - = = _ [21.400 [9,789 | 2,09.882 e021] : : ~_|_015_| 4,000 | 9,789 | 39,156 | 17.400 | 9,789 | 1,70,326 sori] 016 | 3,200 | 9,789 | 31.325 | 14,200 [_ 9.789 | 1.39.01 Value of stock as on 31-01-2021 (000) = & 1,39,001 (v) Value of components used during the month of January, 2021: Sum of material requisitions 011 to 016 (‘000) = % 29,694 + % 44,541 + % 21,611 + % 14,734 + % 39,156 + F 31,325 = 2 1,81,061 . (vi) Inventory Turnover Ratio = Value of materials used/Average stock value = 1,81,061 (1,39,001 + 34,335)/2 = 1,81,061 86,668 = 2.09

You might also like