Assignment Questions - MATERIAL COSTING

Assignment Questions

 

MATERIAL COSTING

Question 1.

The average annual consumption of a material is 18,250 units at a price of Rs. 36.50 per unit. The storage cost is 20% on an average inventory and the cost of placing an order is Rs. 50. How much quantity is to be purchased at a time?

 

Question 2. ZED Company supplies plastic crockery to fast food restaurants in metropolitan city. One of its products is a special bowl, disposable after initial use, for serving soups to its customers. Bowls are sold in pack 10 pieces at a price of Rs. 50 per pack. The demand for plastic bowl has been forecasted at a fairly steady rate of 40,000 packs every year. The company purchases the bowl direct from manufacturer at Rs. 40 per pack within a three days lead time. The ordering and related cost is Rs. 8 per order. The storage cost is 10% per cent per annum of average inventory investment.

 

Required:

(i) Calculate Economic Order Quantity.

(ii) Calculate number of orders needed every year.

(iii) Calculate the total cost of ordering and storage bowls for the year.

(iv) Determine when should the next order to be placed. (Assuming that the company does maintain a safety stock and that the present inventory level is 333 packs with a year of 360 working days.

 

Question 3. About 50 items are required every day for a machine. A fixed cost of  Rs.50 per order is incurred for placing an order. The Inventory carrying cost per item amounts to Rs. 0.02 per day. The lead period is 32 days. Compute:

(i) Economic order quantity.

(ii) Re-order level.

 

Question 4. The annual carrying cost of material 'X' is Rs. 3.6 per unit and its total carrying cost is Rs.9,000 per annum. What would be the Economic order quantity for material 'X', if there is no safety stock of material X ?

 

Question 5. The following information relating to a type of Raw material is available:

Annual demand                                                                           2000 units

Unit price                                                                                       Rs.20.00

Ordering cost per order                                                               Rs.20.00

Storage cost                                                                                  2% p.a.

Interest rate                                                                                  8% p.a.

Lead time                                                                                      Half-month

Calculate economic order quantity and total annual inventory cost of the raw material.

 

Question 6. From the following figures relating to two components X and Y, compute Reorder Level, Minimum Level, Maximum Level and Average Stock Level.

Particulars	Component X	Component Y
Maximum consumption per week	75 units	75 units
Average consumption per week	50 units	50 units
Minimum consumption per week	25 units	25 units
Reorder period	4 to 6 weeks	2 to 4 weeks
Reorder quantity	400 units	600 units

 

Question 7. From the following particulars in respect of a material, compute the Economic Ordering Quantity by preparing a table.

Ordering Quantities	Price Per Kg. [Rs.]
Less than 250	6.00
250 and less than 800	5.90
800 and less than 2000	5.80
2000 and less than 4000	5.70
4000 and above	5.60

The annual demand for the material is 4000 kg. Stock holding costs are 20% of the material cost per annum. The ordering and receiving costs are Rs.10 per order.

 

 

ANSWER HINTS

1. 500 units


2. i. 400 packs; ii. 100 order per year; iii.Rs. 1,600; iv. immediately.


3. 500 units; 1,600 units


4. 5,000 units.


5. 200 Units; Rs.40,400


6. Reorder Level= 450 units & 300 units.; Minimum Level= 200 units & 150 units; Maximum Level= 750 units & 850 units; Average Level = 475 units & 500 units.


7. EOQ = 800 units

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