Question Four

You are the warehouse manager for Healthy Foods Limited. For proper management of the warehouse so as to ensure continuous production without interruption due to lack of stock, you decide to define various stock control level. The information that follows should help you determine your stock control levels.

Annual consumption $=4000$

Cost of material per unit $=$ GHS $50\mathrm{.}00$

Cost of placing and receiving one order $=$ GHS $40\mathrm{.}00$

Carrying and storage cost $=8\%$ per annum of Inventory Value

Further information given is

Minimum consumption: $100$ units per week each

Maximum consumption: $150$ units per week each

Normal consumption: $120$ units per week each

Reorder quantity is the same as the Economic Order Quantity

Reorder period: $4$ to $6$ weeks,

Maximum reorder period for emergency purchases is $2$ weeks respectively.

You are required to calculate:

a$)$ Economic Order Quantity

b$)$ Reorder level, $($c$)$ Maximum Stock Level

c$)$ Minimum Stock Level

d$)$ Average stock Level

e$)$ Critical Level

TOTAL $(20$ MARKS$)$

Question Five

During the most recent year, Fairchild Company had the following data associated with the product it made for the month of June $2017$:

Units in beginning inventory

Units produced

Units sold $(GH150\mathrm{.}00$ per unit$)$

Variable costs per unit:

Direct materials

Direct labour

Variable overhead

$\frac{?}{\text{b}\text{a}\text{r}}(10,000),C*P=(Q*P-Q*5)($marginal a

$8,000$

GH $$25\mathrm{.}00$

$=2,000150$

GH $50\mathrm{.}00$

GH $$25\mathrm{.}00$

$=200,00$

Fixed costs:

Fixed overhead per unit produced

Total fixed selling and administrative

GH $12\mathrm{.}50$

$GH60,000\mathrm{.}00$

Required:

a$)$ Prepare the income statement for the company using the marginal costing approach.

$(10$ marks$)$

b$)$ One of the important aspects of the overall material management is the inventory control. List and explain the two problems associated with inventory control.

c$)$ Explain two $(2)$ functions of management accounting.

$(6$ marks$)$

TOTAL $(20$ MARKS$)$

$(4$ marks$)$