Hi Tutor, I have a question that is asking me to answer these questions as part of my ACCA exam preparation, can you please explain and give an example on how to deal with these questions. Thanks
MCQ: 15 MATERIALS 15.1 The demand for a product is 12,500 units for a three month period. Each unit of product has a purchase price of $15 and ordering costs are $20 per order placed. The annual holding cost of one unit of product is 10%% of its purchase price. What is the Economic Order Quantity (to the nearest unit)? B Question 11 EOQ 1,155 A business currently orders 1,000 units of product X at a time. It has decided that it may be better to 5.2 company determines its order quantity for a raw material by using the Economic Order Quantity (EQQ) model. use the Economic Order Quantity method to establish an optimal reorder quantity. What would be the effects on the EOQ and the total annual holding cost of a decrease in Information regarding inventory is given below: the cost of ordering a batch of raw material? Purchase price $15/unit EOQ Total annual holding cost Fixed cost per order $200 Higher Holding cost 8% of the purchase price per year Lower Higher Annual demand 12,000 units Lower Lower Current annual total inventory costs are $183,000, being the total of the purchasing, ordering and 15.3 Data relating to a particular stores item are as follows: holding costs of product X. Average daily usage 400 units Maximum daily usag 520 units Required: Minimum daily usage 180 units Lead time for replenishment of inventory 10 to 15 days Calculate the Economic Order Quantity. (2 marks) Reorder quantity 8,090 units Using your answer to (a) above calculate the revised annual total materials costs for What reorder level (in units) will prevent stock outs product X and so establish the difference compared to the current ordering policy. 5,000 (4 marks) 6,000 29 7,800 List ways in which discounts might affect this Economic Order Quantity calculation and 8,000 subsequent materials costs. (4 marks) (10 marks) 153 Data relating to a particular stores them are as follows: 400 units Maximum daily usage 520 units Minimum daily usage 180 units Lead time for replenishment of inventory 10 10 15 days Reorder quantity 8,000 units Question 14 POINT What reorder level (in units) will prevent stock outs? Point uses the economic order quantity (EOQ) model to establish the reorder quantity for raw material 5,000 Y. The company holds no buffer stock. Information relating to raw material Y is as follows: c 8 000 Annual usage 48,000 units 15.4 hase price $80 per unit $40 per unit and the cost of placing an order is $160. The annual holding cost of one Ordering costs $120 per order component is equal to 8% of its purchase price. Annual holding costs 10% of the purchase price What is the Economic Order Quantity (to the nearest unit) of the component? Required: (a) Calculate: 1.342 the EOQ for raw material Y; and the total annual cost of purchasing, ordering and holding inventory of raw material V. (4 marks) The supplier has offered Point a discount of 1% on the purchase price if each order placed is for 2,000 units. Required: Calculate the total annual saving to Point of accepting this offer. (3 marks) REVISION QUESTION BANK - MANAGEMENT ACCOUNTING (F2/FMA) List FOUR examples of holding costs. (2 marks) 15.5 (EOQ) model. A company determines its order quantity for a component using the Economic Order Quantity (9 marks) What would be the effects on the EOQ and the total annual ordering cast of an increase in the annual cost of holding one unit of the component in inventory? Total annual ordering cast Lower Higher Higher No effect
