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8. Frasier Ltd operates a number of shops in the main shopping centres of Sliema, Paola and Valletta. The inventories are stored in a warehouse

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8. Frasier Ltd operates a number of shops in the main shopping centres of Sliema, Paola and Valletta. The inventories are stored in a warehouse in Mriehel and deliveries are regularly made to the shops. On 1 July 2018, there were 9,800 units of product Zee in inventory, with a total value of 548,800. The following movements in product Zee took place during the month ended 31 July 2018: Purchase date Units Purchase price per unit Total freight costs July 3 5,200 56.40 8,320 July 9 7,620 58.70 9,906 July 17 5,970 62.60 8,358 July 25 8,120 55.80 9,744 Issues date Units Selling price per unit July 2 7,200 78.00 July 7 7,100 79.00 July 13 5,360 85.00 July 15 2,110 85.00 July 28 9,260 81.00 The following additional information about product Zee is available: Re-order period 4 - 6 days Economic order quantity 3,820 units Maximum consumption per day 1,100 units Minimum consumption per day 960 units Required: A. Calculate the inventory value of product Zee as at 31 July 2018, using the following methods of valuation on a perpetual basis: i. First In First Out (FIFO) i. Weighted Average Cost (AVCO) (10) B. Calculate the gross profit for the month of July 2018 on product Zee, using both methods of inventory valuation. (5) C. Using the information provided, calculate the following for product Zee: i. Re-order level; il. Maximum inventory level; iii. Minimum inventory level. (6) D. Why is it important to control inventory levels? State and briefly describe THREE types of costs that may arise when excessive stock is held. The inventory value per unit is to be calculated to the nearest 2 decimal places

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