MATERIALS :
1. The particulars relating to 1,200 kg of a certain raw material
purchased by a Company during April, 2023 were as follows :
(a) Lot price quoted by supplier and accepted by the company
for placing the purchase order :
Lot up to 1,000 kg @ Rs. 22 per kg
From 1,001 to 1,500 kg @ Rs. 20 per kg
From 1,501 to 2,000 kg @ Rs. 18 per kg
(b) Trade discount @20%
(c) Additional charge for containers @ Rs.10 per drum of 25 kg.
(d) Credit allowed on return of containers @ Rs. 8 per drum.
(e) GST at 10% on raw material and 5% on drums.
(f) Total freight paid by the purchaser Rs. 240.
(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.
The entire quantity was received and issued to production. The
containers are returned in due course.
Draw up the suitable statement to show :
(i) Total cost of material purchased ;and
(ii) Unit cost of material issued to production.
2. Materials X is used in manufacturing a product ‘Zed’. The demand for
this product for the year is forecast to be 26,000 units. Each finished
unit of product ‘Zed’ contains 0.72 kg of material X. There is a
preparation loss of 10% of materials used. It is not planned to change
the stock-holding of product ‘Zed’ in the near future, but a reduction of
1,000 kg in the stock of material is planned.
You are required to calculate the quantity of material X that needs to
be purchased in the year.
[Link] annual demand for a product is 6,400 units. The unit cost is Rs. 6
and inventory carrying cost per unit per annum is 25% of the average
inventory cost. If the cost of procurement is Rs. 75, determine
economic order quantity (EOQ); (ii) number of orders per annum; and
(iii) Time between two consecutive orders.
[Link] Limited produces a product which has a monthly demand of
52,000 units. The product requires a component X which is purchased
at Rs. 15 per unit. For every finished product 2 units of component X
are required. The ordering cost is Rs. 350 per order and carrying cost is
12% p.a.
Required:
(i) Calculate the economic order quantity for component X.
(ii) If the minimum lot size to be applied is 52,000 units, what
extra cost the company has to incur?
(iii) What is the minimum carrying cost the company has to
incur?
2
[Link] limited manufactures a special product, which required LED. The
following particulars were collected for the year 2022-23:
I. Monthly 7,500 units
demand of ZED
II. Cost of placing Rs. 500
an order
III. Re-order 5 to 8
period weeks
IV. Cost per unit Rs 60
V. Carrying cost % 10%
p.a.
VI. Normal usage 500 units Required
per week
(i) Re-
VII. Minimum usage 250 units
per week order
VIII. Maximum 750 units
usage per week
quantity
(ii) Re-order level
(iii) Minimum stock level
(iv) Maximum stock level
(v) Average stock level
6.A manufacturing company has an expected usage of 6,00,000 units of
a certain product next year. The cost of processing an order is
estimated to be Rs. 300 and the average carrying cost per unit per year
3
is estimated to be Rs. 2.40 per unit. The order is to placed in a multiple
of 1,000 units. The lead time of an order is 7 days and the company
wishes to keep a reserve supply of 6,000 units. Assuming 300 working
days per year. Calculate EOQ and reorder level.
[Link] 200 units are required per quarter. Rs. 100 per order is
incurred for placing an order. The inventory carrying cost per unit is Rs.
4. The re-order level is 350 units. The minimum usage is 25 units per
week and re-order period is 4 to 6 weeks.
Compute: (a)Economic order quantity ; and (b) Maximum level
8. From the following particulars, calculate the best quantity to be
ordered :
Ordering Quantity (kg) Price per kg(Rs.)
Less than 500 10.00
500 and less than 1,600 9.60
1,600 and less than 4,000 9.40
4,000 and less than 8,000 9.20
8,000 and above 9.00
The annual requirement of the material is 8,000 kg. Stock holding
(carrying) cost is 20% of material cost per annum. Ordering (re-
ordering) Cost per order is Rs. 10.
9. From the following information prepare Stores Ledger for the month
of February 2023 under (i) FIFO and (ii) Weighted Average Method.
Receipts Issues
Date Units Rate per Date Units
unit
Feb 3 Purchased 450 Rs.16.20 Feb 4 350
4
7 Purchased 780 Rs.17.50 6 220
13 Purchased 340 Rs.16.80 9 670
18 Returned 65 16 325
from
workshop
(Issued on
Feb 9)
24 Purchased 670 Rs.16.50 21 270
26 430
Further information : Opening balance on 1.2.2023 - 620 units @ Rs.
15.40 per unit. A shortage of 24 units was noticed and recorded on
15th Feb.
[Link] following transaction took place in respect of a raw materials
during the month of January, 2023:
Date Particulars Kg. Rate per Kg.
January
1 Balance 1,00 Rs. 9
0
2 Purchased 1,50 Rs. 10
0
5 Issued 390 -
8 Shortage 10
15 Surplus returned by a 200 Rs.12
production dept.
20 Issued 1000 -
25 Received from vendor 300
Rs.14
28 Issued 1,20 -
0
31 Issued 100 -
5
You are required to write up the Stores Ledger Account applying simple
average method of pricing of issues.
