Question No. 3:(6 marks)

(a): Mian Crockery received an order for 50 units of product. In anticipation of spoilage, production 52 units were started. During inspection 10 units were found defective and 2 units were classified as spoiled and sold for Rs. 90.

Initial cost: Material Rs. 80 per unit Labor Rs. 50 per unit and FOH is 100%

Additional Cost: Material Rs. 100 Labor Rs. 200 and FOH 100%

The good units dispatched to customer at a price of Rs. 240 per unit.

Requirements: Pass journal Entries if loss is charged to JOB and FOH.

(b): Following data are available with respect of material M6.

M6: Annual Requirement 56250 Units, cost to place an order Rs. 100, Interest rate is 0.1, carrying cost is Rs. 5 per unit and per unit cost is Rs.50, average daily requirement is 160 units, Lead time 40 to 50 days Maximum daily requirement 180 units and Minimum daily requirement is 140-unit Emergency Lead time 5days.

Requirements: Calculate EOQ with proof, No. of orders and Frequency of order and also calculate Maximum limit, Minimum limit, Order point and Danger Level.