SEMESTER MARCH – AUGUST 2021

CASE STUDY 1

ACC319

a. Semua Rakyat Manufacturing Co produces orange juices for their customers around
Melaka. Every day, 150 kg oranges will be used in the production. The cost of oranges
per kg is RM4.00. The company operates for 250 days per year. Cost of ordering the
orange is RM30 per order while the storage cost is 10% per annum.

Required:

Calculate the economic order quantity (EOQ) using the formula method.
(5 marks)

b. The following information relates to the material X, one of the materials consumed in
a tyre manufacturing company.

Normal or average usage = 100 units per week

Maximum usage = 150 units per week
Minimum usage = 50 per week
Reorder quantity = 300 units
Lead time between 4 - 6 weeks

Required:

Calculate for the material X the following:

i. re-order level
ii. minimum inventory level
iii. maximum inventory level
(5 marks)

c. Briefly explain the following documents:

i. Purchase requisition notes

ii. Purchase order
(3 marks)
d. Cemerlang Sdn Bhd is a manufacturing company that uses a costing system where all
its purchases and issues of materials are recorded in a store ledger card using Last-In
First-Out (LIFO) method. Its inventory recording as at 1 September 2019 shows an
opening balance of 3,000 units valued at RM90,000.

The followings are the store transactions for the month of September 2019:

Date Receipt Issues

3 Sept 2019 To production 2,800 units
9 Sept 2019 5,000 units @ RM32 each
12 Sept 2019 To production 2,600 units
16 Sept 2019 2,000 units @ RM33 each
17 Sept 2019 Returned to supplier 110 units of
material purchased on 16 Sept
2019
23 Sept 2019 7,000 units @ RM35 each
26 Sept 2019 To production 8,000 units

There are 3,400 units of closing inventory as at 30th September 2019.

Required:

i. Prepare a store ledger card for the month of September 2019.

(10 marks.)

ii. Calculate the value of closing inventory as of 30 September 2019.

(3 marks)

iii. List TWO (2) disadvantages of the Last-In First-Out method of inventory issues.

(2 marks)
(Total: 28 marks