chapter 6 accounting for material

8/12/2019 Chapter 6 Accounting for Material

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Chapter 6: Accounting for Materials 2013

1 Ibrahim Sameer ACCA (FMA Villa College)

F2 - Management Accounting

ACCA Tutorial Questions

Chapter 6 Accounting for Material


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Question 1

A wholesaler has 8,450 units outstanding for part X 100 on existing customers orders; there are

3,925 units in inventory and the calculated free inventory is 5,525 units.

How many units does the wholesaler have an order with his supplier?

Question 2

A large retailer with multiple outlets maintains a central warehouse from which the outlets are

supplied. The following information is available for Part Number SF525.

Average usage 350 per day

Minimum usage 180 per day

Maximum usage 420 per day

Lead time for replenishment 11-15 days

Re order quantity 6,500 units

Re order level 6,300 units

a. Based on the data above, what is the maximum level of inventory?b. Based on the data above, what is the approximate number of Part Number SF525 carried

as buffer inventory?Question 3

A company is able to manufacture its own components for inventory at the rate of 4,000 units a

week. Demand for the component is at the rate of 2,000 units a week. Set up costs for each

production run are $50. The cost of holding one unit of inventory is $0.001 a week.

Required

Calculate the economic production run.


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Question 4

A company uses an item of inventory as follows:

Purchase price $96 per unit

Annual demand 4,000 units

Ordering cost $300

Annual holding cost 10% of purchase price

Economic order quantity 500 units

Required

Ascertain whether the company should order 1,000 units at a time in order to secure an 8%

discount.

Question 5

A domestic appliance retailer with multiple outlets sells a popular toaster known as the Autocrisp

2000, for which the following information is available.

Average sales 85 per day

Maximum sales 105 per days

Minimum sales 60 per day

Lead time 14 20 days

Reorder quantity 1,850

Required

a. Based on the above data, at what level of inventory would a replenishment order beissued?

b.

Based on the above data, what is the maximum inventory level?


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Question 6

The demand for a product is 13,550 units for a three month period. Each unit of product has a

purchase price of $18 and ordering cost are $23 per order placed.

The annual holding cost of one unit of product is 10% of its purchase price.

What is the EOQ (to the nearest unit)?

Question 7

For a particular component, the re-order quantity is 6,500 units and the average inventory is

3,700 units.

Calculate the level of safety inventory?

Question 8

ABC Co gradually receives its re-supply of inventory at a rate of 10,000 units a week. Other

information is available as follows.

Weekly demand 6,000 units

Set-up costs for each production run $165

Weekly cost of holding one unit $0.0075

What is the economic production run?

chapter 6 accounting for material

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