Solved Problems of Cost Accounting


Problem 5:
The Rustam Company has developed the following data to assist in controlling one of its inventory items:
Economic Order Quantity: 1000 Kg
Average daily use: 100 Kg
Minimum daily use: 80 Kg
Maximum daily use: 120 Kg
Working days per year 250 days
Safety stock  400 Kg
Cost of carrying Inventory  Rs. 1.00 per Kg. per year
Lead Time 7 working days
Required:
(i) Order Point
(ii) Average Inventory
(iii) Normal Maximum Inventory
(iv) Absolute Maximum Inventory
(v) Cost of Placing one order.

Solution:
(i) Order Point = Normal daily use x lead time + safety stock
Order Point = (100 x 7) + 400 = 1100 Kg.

Inventory Turn Over:
Inventory turnover is a ratio of the value of materials used or finished goods sold during a certain period to the average inventory of materials or finished goods held during the period. In the form of formula, it may be written as following:




Comments

Post a Comment

Popular posts from this blog

What is the Dynamic Theory of Profit

Image
Clark's Dynamic Theory of Profit And Its Criticism The Dynamic Theory of Profit is associated with the name of an American Economist, J. B. Clark. In the world of reality, according to J. B. Clark, profit arises only in a dynamic economy. An economy is said to be dynamic when there is a change in population growth or change in the method of production or a change in the consumer’s wants, etc. A society which is without these changes is called a static society. In a static society, only monopoly profits continue to exist. All other economic profits are gradually eliminated by competition. In a dynamic society, an entrepreneur is always confronted with continuous unpredictable changes in demand for his product. The variation in demand may take place due to changes in fashions, tastes, the standard of living, distribution of income, population, new inventions, international repercussions, technological advances, etc. A prudent entrepreneur will always keep an eye on future demand
Read more

Compare the anatomy of Bifacial and Isobilateral leaves

BIFACIAL LEAF: It is also called dorsiventral leaf. This leaf is more strongly illuminated on upper surface than on lower surface. This unequal illumination induces a difference in the internal structure between upper and lower sides. Its internal structure shows: (1)        Upper Epidermis This is single layer of cells with thick cuticle which checks excessive evaporation of water from the surface. It does not contains chloroplasts, stomata are also absent. (2)        Lower Epidermis This is also single layer but with a thin cuticle. It bears many stomata, two guard cells of which contain some chloroplast, none are present in the epidermal cells. Internal to each stomata is large cavity called respiratory cavity. Lower epidermis of leaf is meant for exchange of gases (oxygen and carbon dioxide) between the atmosphere and the plant body. Excess water also evaporates from lower epidermis. (3)        Mesophyll The ground tissue lying between upper epidermis and th
Read more

osmoregulation in terrestrial and aquatic animals

Mechanism of osmoregulation is very important for all groups of animals whether inhibting land or water. Unlike plant cells, animal cells when placed in hypotonic solution burst due to the continuous absorption of water. On the contrary they would shrink and die if constantly placed in hypertonic solution. Normally uptake and loss of water are in balance for proper survival of cell. (1)        Osmoregulation in terrestrial animals: Terrestrial animals are more likely to loose water by evaporation through their permeable surfaces exposed to amsophere. Among various animal groups only Arthropods and vertebrates became the most successful land dwellers. They have developed number of strategies to maintain osmoregulation of their body fluid. (a) Water proof external coverings: To prevent water loss through external surfaces, vertebrates like reptiles, birds and mammals have water proof keratinized epidermis. Similarly the insects have developed external water proof layer called
Read more