(a) A Limited is manufacturing a part, which is used in computer. Presently the company follows traditional system of the purchasing, quality check, storage and processing. CEO of the company has suggested that by implementing Just in time inventory system for material purchases, the company will benefit a lot. As per present policy of inventory, raw material required for 2 months production and finished goods equivalent to the 2 weeks production are kept in stock. Other information are as under: The Average inventory of raw material is held by the company throughout the year. Purchase cost of the raw material is 15 Crores for the year. Now on applying Just in time, the company decided to take its production requirement directly from the suppliers. This will result into an increase of the 10% in the cost of raw material purchased but will save the inventory holding cost by 70 Lakhs. Raw material inventory insurance will not be required now, which is 1.40 Crores per annum. Savings in other overheads will be 20 Lakhs per annum. Projected production for the year is 2,00,000 Units. The company plans to maintain inventory of finished goods as per present policy only. There is a possibility of production stoppages due to unavailability of raw material from the suppliers. This could happen due to delay in delivery by the suppliers. The labour works in one 8-hour shift per day and will remain idle if there is no material to work on. Due to stoppage of production for this reason, it is possible to have stockout of 4,000 units in a year. Stockout represents lost sales opportunity due to unavailability of finished goods i.e. the customer walks away without purchasing any product. However, if overtime is done by labour the stockout may reduced to 2,500 units. This overtime will cost 20 Lakhs. I Currently, sale price is 6,000 per unit. Raw material procurement cost is 1,000 per unit, that will increase by 10% under just in time inventory system. Other variable overheads are 3,250 per unit. Required A. ADVISE on: (i) Acceptability of the company regarding implementation of the Just in time procurement system. (4 Marks) (ii) Necessity of overtime cost be incurred to reduce Stockout. (2 Marks) B. RECOMMEND factors that the management needs to consider before implementing the just in time procurement system. (4 Marks) (b) ORAL LTD. is engaged in marketing of wide range of electronic goods. The area is divided in four zones - North, South, East and West. Each zone has zonal sales head. The company fixes annual sales target for zonal heads. The cost of sales target fixed during 2021 is as under: North South East West The Zonal sales managers are paid commission @ 10% on sales made by them. During 2021 the sales commission paid for each zone is as under: North South East West 25,00,000 22,00,000 26,50,000 20,00,000 3,00,000 2,90,000 3,10,000 2,40,000 The summary of the variances calculated for each zone are as under: Particulars South Sales Price Variance 60,000 A Sales Volume Variance 2,60,000 F Sales Margin Mix Variance 80,000 F North 40,000 F 60,000 A 1,40,000 A East 50,000 A 1,50,000 F 1,70,000 F 1. Contribution earned to the company 2. Achievement of the sales target. West 20,000 A 80,000 F 30,000 A The Company wants to award an incentive to the best performer among all the zonal managers on the basis of: 3. Sales margin achieved against target margin. Required (A) CALCULATE the amount of sales target fixed and the actual amount of contribution earned in case of each of the zonal sales manager. (5 Marks) (B) ANALYZE the overall performance of these zonal sales managers taking three relevant base factors and recommend the best performer. (4 + 1 = 5 Marks)