Q2

A) Every business establishes & follows a certain procedure for executing its purchase operations. Such procedure always involves the preparation of a number of documents and relevant authorities for their approval. One of these important documents involved in purchase procedure is called Quotation from supplier.

Required:

Explain why quotation is prepared by the supplier, what information is added in it, how many quotations a buyer should collect to minimum, use of quotation(s) for the buyer. Explain your answer with the help of a sample quotation. (4 Marks)

B) Dice LLC specializes in electrical products. It uses the following three materials in its products:

Materials

D 1

D 2

D 3

Lead time (in months)

1-3'

2-3'

2-4'

Maximum consumption per month

30,000

25,000

50,000

Minimum consumption per month

10,000

8,000

19,000

Maximum lead time for emergency purchase

3

1

2

Cost of placing an order

200

200

200

Annual carrying cost per unit

100

100

100

Required: Calculate the following for the three materials:

a) Danger stock level and number of orders to placed in a year. (2 Marks)

b) Reorder quantity. (1 Mark)

c) Minimum stock level. (1 Mark)

d) Maximum stock level. (1 Mark)

e) Average stock level. (1 Mark)

B) Dice LLC specializes in electrical products. It uses the following three materials in its products:

Materials

D 1

D 2

D 3

Lead time (in months)

1-3'

2-3'

2-4'

Maximum consumption per month

30,000

25,000

50,000

Minimum consumption per month

10,000

8,000

19,000

Maximum lead time for emergency purchase

3

1

2

Cost of placing an order

200

200

200

Annual carrying cost per unit

100

100

100

Required: Calculate the following for the three materials:

a) Danger stock level and number of orders to placed in a year. (2 Marks)

b) Reorder quantity. (1 Mark)

c) Minimum stock level. (1 Mark)

d) Maximum stock level. (1 Mark)

e) Average stock level. (1 Mark)