Management Accounting for Engineers

Inventory Control
Dr. (CA) Ankita Jain

Q.1 Calculate Economic Order Quantity from the following information. Also state the number
of orders to be placed in a year.
Consumption of materials per annum : 10,000 kg.
Order placing cost per order : Rs. 50
Cost per kg. of raw materials : Rs. 2
Storage costs : 8% of cost per unit

Q. 2 Compute E.O.Q. and the total variable cost for the following:
Annual Demand = 5,000 units
Unit price = Rs. 20.00
Order cost = Rs.16.00
Storage rate = 2% per annum
Interest rate = 12% per annum
Obsolescence rate = 6% per annum

Q.3 A Ltd provides the following information in respect of Material X.

Supply period: 5 to 15 days
Rate of consumption:
Average: 15 units per day
Maximum: 20 units per day
Yearly : 5000 units
Ordering cost: Rs. 20 per order
Purchase price per unit: Rs. 50
Storage cost : 10% of unit value
Compute a) Re-order Level b) Maximum Level c) Minimum Level

Q.4 In a factory component A is used as follows:

Normal Usage 50 kg/week
Maximum usage 75 kg/week
Minimum usage 25 kg/week
Reorder quantity 300 kg
Reorder period 4 to 6 weeks

Compute a) Re-order Level b) Maximum Level c) Minimum Level d)

Average Level