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    Waseim khan Barik zai
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    Usman Limited produces Stigma and had projected sales of 50,000 units in 2019-20. It maintained a safety stock of 1,000 units and used economic order quantity to place orders. Total carrying costs were Rs. 1,000,000 with a carrying cost per unit per month of Rs. 40. For 2020-21, annual sales are projected to be 60,000 units with a sale price of Rs. 5,000 per unit and 10% contribution margin. Carrying costs per unit will increase 25% while fixed ordering costs will increase 20% and variable ordering costs will increase 10%.

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    Usman Limited produces Stigma and had projected sales of 50,000 units in 2019-20. It maintained a safety stock of 1,000 units and used economic order quantity to place orders. Total carrying costs were Rs. 1,000,000 with a carrying cost per unit per month of Rs. 40. For 2020-21, annual sales are projected to be 60,000 units with a sale price of Rs. 5,000 per unit and 10% contribution margin. Carrying costs per unit will increase 25% while fixed ordering costs will increase 20% and variable ordering costs will increase 10%.

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    5 views1 page

    Question 2

    Uploaded by

    Waseim khan Barik zai
    Usman Limited produces Stigma and had projected sales of 50,000 units in 2019-20. It maintained a safety stock of 1,000 units and used economic order quantity to place orders. Total carrying costs were Rs. 1,000,000 with a carrying cost per unit per month of Rs. 40. For 2020-21, annual sales are projected to be 60,000 units with a sale price of Rs. 5,000 per unit and 10% contribution margin. Carrying costs per unit will increase 25% while fixed ordering costs will increase 20% and variable ordering costs will increase 10%.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    Question- 2

    Usman Limited (UL) deals in single product Stigma.For 2019-20,the sale of Stigma was projected at 50,000 units.UL followed
    a policy of maintaining safety stock of 1000 units and placed orders on the basis of ‘Economic Order Quantity’.The total
    carrying costs amounted to Rs.1,000,000 whereas carrying cost per unit per month was Rs.40.
    The projections for 2020-21 are as follows;
    • Annual sales would be 60,000 units
    • Expected sale price of the Stigma is Rs.5,000 per unit and expected contribution margin is 10% of sales.
    • Carrying cost per unit is expected to increase by 25%
    • Fixed costs of the ordering department would increase by 20% over last year whereas variable costs associated
    with processing an order would increase by 10%
    • There would be no change in the policy for maintenance of safety stock.
    Required:
    (a) Compute the Economic Order quantity for year 2020-21.
    (b) Total annual ordering and carrying costs (10)

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