ASSIGNMENT UNIT 1

Q1. The annual demand of a particular item of inventory is 10,000 units.

Inventory carrying cost is 20% and ordering cost is Rs. 40 per order. The price
quoted by the supplier is Rs. 4 per unit. However the supplier is willing to give 5%
discount for orders of 1500 units or more. Is it worthwhile to avail the discount
offer?

Q2. A company manufactures a product from a raw material, which is purchased

at Rs. 54 per kg. The company incurs a handling cost of Rs. 350 plus freight of Rs.
400 per order. The incremental carrying cost of inventory of raw material is Rs.
0.50 per kg per month. In addition the cost of working capital finance on the
investment in inventory of raw material is Rs. 8 per kg per annum. The annual
production of the product is 94,500 units and 2 units are obtained from one kg of
raw material. You are required to
1. Calculate the economic order quantity of raw materials.
2. Advise how frequently should the orders for procurement be placed?

Q3. At the beginning of October 2013 Quality Brush Company had in stock:-
10,000 brushes valued at Rs. 10 each. Further purchases were made during the
month as follows:-
7th October 4,000 brushes @ 12.50
14th October 6,000 brushes @ 15
24th October 8,000 brushes @16.50
Issues to the shop floor were as follows:-
16th October 16,000 brushes
28th October 10,000 brushes
You are required to prepare the stores ledger card for the month of October on
the assumptions that materials were issued on the basis of FIFO and LIFO.
Q4. Differentiate between
1. Perpetual Inventory system and Periodical Inventory system
2. Financial and cost accounting

Q5. Write short notes on FSND and JIT techniques of Inventory Control.