1. A large plant in Kansas produces edgers. The following information relates to its production.

Average demand for edgers: 720 per day

Maximum demand for edgers: 780 per day

Minimum demand for edgers: 650 per day

Unit carrying cost: $4

Holding Cost: $10

Annual Demand: 180,000 units

Lead Time: 20 - 22 days

Calculate:

1. The minimum stock level ( 2 marks)
2. Maximum stock level (2 marks)
3. Re-order level (1 marks)
4. EOQ (2 marks)
5. Explain to a store owner the meaning of the EOQ and minimum stock level figures calculated above. (3 marks)

2. The following information relates to QP Ltd. for the year 2014. Opening stock for the period was 350 units valued at $1.50 each.

Bought Sold

January 5 30 units @ $2.00 each January 3 220 units @ $5.00

January 6 200 units @ $3.00 each January 8 180 units @$ 5.50

January 10 50 units @ $3.25 each January 20 200 units @$6.00

January 15 59 units @ $4.00 each January 25 70 units @ $6.00

January 17 68 units @ $3.75 each January 30 195 units @ $6.50

January 27 150 units @ $4.10 each

Required: Calculate closing stock using:

1. First-in-first-out method (FIFO) (6 marks)
2. Average cost method (AVCO) ( 6 marks)

3. Prepare the trading account using FIFO and AVCO to determine gross profit (7 marks)