Stores pricing and calculation of EOQ

(a) Atlas Limited Is having difficulty costing material X to the various jobs that it is used on. The material is bought in bulk and recent receipts and issues have been:

Required:
Cost the issue of material X for June and calculate the value of the closing stock on the following bases:
(i) FIFO;
(ii) LIFO;
(iii) weighted average.

(b) Atlas is reviewing its stock control policy with regard to material X. You are told that the cost of making one order is 100, the cost of holding 1 kilo for one year is 0.25 and the annual demand for material X is 80 000. There is no lead time or buffer stock. Required: Determine the following for material X: (i) the economic order quantity, briefly explaining what this figure represents; (ii) the average stock; (iii) the number of orders to be made per year. (8 marks)

(c) Explain what you understand by the terms 'buffer stock' and 'lead time', and briefly consider any stock policy that would minimize or eliminate such stock costs. (7 marks) (Total 25 marks) AAT Cost Accounting and Budgeting.

LO1

Transcribed Image Text:

1/6/03 Balance b/f 1000 kilos at 4 per kilo 3/6/03 Receipts 2000 kilos at 5 per kilo 6/6/03 Receipts 1500 kilos at 5.5 per kilo 9/6/03 Issues 2500 kilos