ACC 116 – MATERIALS

Suggested Solution

1. Super Cakes Sdn Bhd:

(i) Economic Order Quantity (EOQ):

D= 480,000 x 0.05 kg = 24,000 kg
O=RM 5
C=RM 1.50

EOQ= (√ 2(240000
1 .5
)(5)
)
EOQ = 400 kg flour

(ii) Maximum Stock Level:

Reorder level = Maximum consumption x Maximum reorder period
= 100 kg x 6 days
= 600 kg
Maximum level = [Re-order Level – (Min. Consumption x Min. Re-order Period)] +
EOQ
= [600 – (50 x 2)] + 400
= 900 kg
(iii) Minimum Stock Level:
Minimum level = Re-order Level – (Average Consumption x Average Re-order
Period)
= 600 – [(50 + 100/2) x (2 + 6/2)]
= 300 kg

2. Company KK:

(a) Economic Order Quantity (EOQ):

D= 2,000 x 3 = 6,000 kg
O= RM 25
C= 0.1 x 6 = RM 0.60

2(6000 )(25 )
EOQ=
√(
EOQ = 707 kg oranges
0 . 60 )
(b) Objective of inventory control:
 Material of the right quality are purchased in the right quantity, right time and
at the right price.
 Funds allocated for material investment are properly utilized.
 Ever ready supply of material when required.
 Proper utilization of material to avoid wastage.
 Proper storage of material.
 3. Berjaya Cetak Sdn Bhd:

i. Economic Order Quantity (EOQ):

D= 36,000 x 12 = 432,000
O= RM 120
C= RM 3

EOQ= (√ 2( 432000)(120
3
)
)
EOQ = 5,879 litres of ink

ii. Total cost:

Total ordering cost= D/Q x O

432,000/5,879 x 120 = RM 8,818
Total storage cost = Q/2 x C
5,879/2 x 3 = RM 8,818

Total Cost = Total ordering cost + Total storage cost

= RM 8,818 + RM 8,818
= RM 17,636

4. Anggun Boutique:

i. Economic Order Quantity (EOQ):

D = 1,200 x 2 = 2,400
O = RM 80
C = 0.05 x RM 5 = RM 0.25
Q 800 metres 1,200 1,600 2,000
No. of order
(times) 2,400/800 = 3 times 2,400/1,200 = 2 2,400/1,600 = 1.5 2,400/2,000 = 1.2
Average stock
(metres) 800/2 = 400 metres 1,200/2 = 600 1,600/2 = 800 2,000/2 = 1,000
Ordering cost
(RM) 3 x RM 80 = RM 240 2 x 80 = 160 1.5 x 80 = 120 1.2 x 80 = 96
Storage Cost
(RM) 400 x RM 0.25 = RM 100 600 x 0.25 = 150 800 x 0.25 = 200 1,000 x 0.25 = 250
Total Cost
(RM) RM 240 + RM 100 = RM 340 160 + 150 = 310 120 + 200 = 320 96 + 250 = 346

EOQ

ii. What will happen if Anggun Boutique orders the material excessively:
 Too much stock will result in:
 High storage cost
 High maintenance cost
 High security cost
 Theft

5. Sara Textiles House:

a) Economic Order Quantity (EOQ):

D = 1,000 x 4 = 4,000
O = RM 125
C = 4% x RM 800 = RM 32
RM 8 RM 40

2( 4000)(125 )
EOQ=
√( 40 )
EOQ = 158 rolls

b) Annual savings:

Current Policy;
Total ordering cost= D/Q x O
4,000/200 x 125 = 2,500

Total storage cost = Q/2 x C

200/2 x 40 = 4,000

Total Cost = Total ordering cost + Total storage cost

= RM 2,500 + 4,000
= RM 6,500

Under EOQ:
Total ordering cost= D/Q x O
4,000/158 x 125 = 3,165

Total storage cost = Q/2 x C

158/2 x 40 = 3,160

Total Cost = Total ordering cost + Total storage cost

= RM 3,165 + RM 3,160
= RM 6,325
Annual saving: RM 6,500 – RM 6,325
: RM 175
6. Zafreena:
 i. Economic Order Quantity (EOQ):

D= 200 kg x 12 = 2,400 kg
O= RM 10 + RM 2 = RM 12
C= RM 4

EOQ= (√ 2(24004 )(12) )

EOQ = 120 kg

ii. Total cost:

Total ordering cost= D/Q x O

2,400/120 x 12 = RM 240

Total storage cost = Q/2 x C

120/2 x 4 = RM 240

Total Cost = Total ordering cost + Total storage cost

= RM 240 + 240
= RM 480

iii. Annual savings:

Current Policy:
Total ordering cost= D/Q x O
2,400/100 x 12 = RM 288

Total storage cost = Q/2 x C

100/2 x 4 = RM 200

Total Cost = Total ordering cost + Total storage cost

= RM 288 + 200
= RM 488

Under EOQ:
Annual total cost = RM480

Annual savings = RM488 – RM480 = RM8

7. Cantik Berseri Sdn. Bhd.:

1) Economic Order Quantity (EOQ):

D= 20,000 x 3 = 60,000
O= RM 60
C= 0.20 x RM 25 = RM 5

2(60000 )(60 )
EOQ=
√( 5 )
EOQ = 1,200 metres

2) Re order Level (ROL)

Reorder level = Maximum consumption x Maximum reorder period
= (300 x 3) x 4
= 3,600 metres

3) Maximum stock level

Maximum level = [Re-order Level – (Min. Consumption x Min. Re-order Period)] +
EOQ
= [3,600 - (200 x 3)(2)] + 1,200
=3,600 metres

4) Minimum stock level:

Minimum level = Re-order Level – (Average Consumption x Average Re-order
Period)
=3,600 - [((200 x 3) + (300 x 3)/2)((2+4)/2)]
=1,350 metres