Chapter 6: Accounting for Materials 2013

F2 - Management Accounting ACCA Tutorial Questions Chapter 6 Accounting for Material

Ibrahim Sameer

ACCA (FMA Villa College)

Chapter 6: Accounting for Materials 2013

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 Minimum usage Maximum usage Lead time for replenishment Re order quantity Re order level 350 per day 180 per day 420 per day 11-15 days 6,500 units 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.

Ibrahim Sameer

ACCA (FMA Villa College)

Chapter 6: Accounting for Materials 2013

Question 4 A company uses an item of inventory as follows: Purchase price Annual demand Ordering cost Annual holding cost Economic order quantity 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 Maximum sales Minimum sales Lead time Reorder quantity Required a. Based on the above data, at what level of inventory would a replenishment order be issued? b. Based on the above data, what is the maximum inventory level? 85 per day 105 per days 60 per day 14 20 days 1,850 $96 per unit 4,000 units $300 10% of purchase price 500 units

Ibrahim Sameer

ACCA (FMA Villa College)

Chapter 6: Accounting for Materials 2013

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 Set-up costs for each production run Weekly cost of holding one unit What is the economic production run? 6,000 units $165 $0.0075

Ibrahim Sameer

ACCA (FMA Villa College)