Students are responsible to ATTEMPT all tutorial questions before class. Your lecturer is here to guide you. 1. Which of the following are possible consequences of a failure of control over the ordering and receipt of materials? a. Incorrect materials being delivered, disrupting operations b. Incorrect prices being paid c. Deliveries other than at the specified time (causing disruption) d. Insufficient control over quality e. Invoiced amounts differing from quantities of goods actually received or prices agreed 2. In the context of inventory management, differentiate between the following: a. Bin card and stores ledger account b. Periodic and continuous stocktaking c. Periodic and continuous stocktaking? 3. What is the Perpetual Inventory System? FREE STOCK BALANCE N To obtain a full picture of the stock position of an item it is necessary to know not only the O physical stock balance, but also the Free Stock Balance. This is defined as follows: T E Free Stock Balance = Physical stock + outstanding replenishment orders - unfulfilled S requirements or allocations The free stock balance is a notional, not physical stock and is a key figure in Inventory control. 4. You are given the following information: Physical Stock balance 1800 units Quantities on outstanding purchase orders 2700 units Quantities on outstanding requisitions 900 units Required: Calculate the Free Stock Balance 5. What role does the free stock balance play in inventory management? 6. You are given the following information Physical Stock balance 1/4 of the Free Stock Balance Quantities on outstanding purchase orders 2700 units Quantities on outstanding requisitions 900 units Required: Calculate the a. Physical stock balance b. Free stock balance 7. You are given the following information Physical Stock balance 1/5 of the Free Stock Balance Quantities on outstanding purchase orders 40,000 units Quantities on outstanding requisitions 5,000 units Required: Calculate the physical stock balance and the free stock balance. INVENTORY CONTROL LEVELS 8. Define lead-time, buffer stock and re-order level. 9. What assumptions are made when using the Economic Order Quantity (EOQ) decision model? 10 The following- 1978201' Lubllbc DIULA Liam LCll'y UUU Lulllb Purchase stock biannually 1,200 units Purchase stock annually 2,400 units It is ascertained that the purchase price per unit is $0.80 for deliveries up to 500 units. A 5% discount is offered by the supplier on the whole order where deliveries are 501 and up to 1,000 units, and 10% reduction on the total order for deliveries in excess of 1,000. Each purchase order incurs administration costs of $5.00 Storage, interest on capital and other are $0.25 per unit of average stock quantity held. Required: Advise management on the optimum order size. 131 Reed Juices Limited purchases 25,000 litres of a material each year from a single supplier. At the moment, the company obtains the material in batch sizes of 800 litres. The material costs $16 per litre, the cost of ordering a new batch from the supplier is $32 and the cost of holding one litre in stock, due to certain technical difculties, is $4 per annum plus an interest cost equal to 15% of the purchase price of the material. The supplier has agreed to offer a discount on orders above a certain size. He has offered the following price structure: Order size (litres) Unit cost ($) 0 499 16.00 500 - 999 15.20 1,000 plus 14.80 Required: a, Prior to considering discounts: calculate the economic order quantity and the annual savings that will be obtained if the EOQ replaced the current lot size. b. The supplier has offered quantity discounts based on the price structure indicated above, after considering discounts, how does this affect the optimal order quantity, and what would be the annual savings compared to the inventory costs with the EOQ you calculated in (a)? C. At a recent meeting, Michael Wong, one of Reed's Ltd senior managers stated that the company should not use the EOQ model because it is based on unrealistic assumptions and no one in the company really understands how the model works. Draft a memo addressed to the company's managing director to respond to Mr. Wong's concerns. VALUATION OF MATERIALS ISSUES AND STOCK- FIFOIAVCO 14, The following transactions relate to a raw material for a period: y TrumanUH!! Total value ($11 VALUATION OF MATERIALS ISSUES AND STOCK- FIFO/AVCO 14. The following transactions relate to a raw material for a period: Day Transaction Units Total value ($) 1 Balance b/f 100 500 Issue 40 A W Receipt 50 275 Receipt 50 300 Issue 70 The weighted average method is used to price material issues. What is the value of the issue on Day 7? a. 376.25 b. 382.81 c. 402.50 d. 410.00 15. ABC limited had an opening stock value of $880 (275 units valued at $3.20 each) on April 1. The following receipts and issues were recorded during April: 8 April Receipts 600 units $3.00 per unit 15 April Receipts 400 units $3.40 per unit 30 April Issues 925 units Using the FIFO method, what was the total value of the issues on April 30? a. $2,580 b. $2,850 c. $2,931 d. $2,935 16. On January 1, MS BA2 started a small business buying and selling thread. She invested her redundancy money of $400,000 in the business, and, during the next six months, the following transactions occurred. Date of Receipt Thread purchases Total cost Date of Thread sales Total quantity (boxes) ($) dispatch boxes value January 13 200 7,200 Feb 10 500 25,000 February 8 400 5.000 March 11 500 24,000 April 20 500 27,000 April 12 400 14.000 June 15 500 14,000 June 25 400 15,200 The thread is stored in an office Ms BA2 has rented, and the closing stock of thread, which was counted on June 30, was 500 boxes. Other expenses incurred, and paid for in cash, during the period amounted to $3,100. Required: (a) Calculate the value of the material issues during the six-month period, and the value of the closing stock at the end of June, no the followO The weighted average method is used to price material issues. What is the value of the issue on Day 7? a. 376-25 b. 382-81 c, 40250 d.410-00 15. ABC limited had an opening stock value of $880 (275 units valued at $3.20 each) on April 1. The following receipts and issues were recorded during April: 8 April Receipts 600 units $3.00 per unit 15 April Receipts 400 units $3.40 per unit 30 April Issues 925 units Using the FIFO method, what was the total value of the issues on April 30? a. $2,580 b. $2,850 c. $2,931 (132,935 16.01] January 1, Ms BA2 started a small business buying and selling thread. She invested her redundancy money of $400,000 in the business, and, during the next six months, the following transactions occurred. quantity (boxes) [3) dispatch boxes value -a-- mum-a.- - _-E_- The thread is stored in an office Ms BA2 has rented, and the closing stock of thread, which was counted on June 30, was 500 boxes. Other expenses incurred, and paid for in cash, during the period amounted to $3,100. Required: (5.) Calculate the value of the material issues during the six-month period, and the value of the closing stock at the end of June, using the following methods of pricing (i) rst-in, rst-out, (ii) weighted average (calculations to two decimal places only) Calculate and discuss the effect each of the three methods of material pricing will have on the reported prot of the business, and examine the performance of the business during the first six-month period. O The weighted average method is used to price material issues. What is the value of the issue on Day 7? a. 376-25 b. 382-81 c, 40250 d.410-00 15. ABC limited had an opening stock value of $880 (275 units valued at $3.20 each) on April 1. The following receipts and issues were recorded during April: 8 April Receipts 600 units $3.00 per unit 15 April Receipts 400 units $3.40 per unit 30 April Issues 925 units Using the FIFO method, what was the total value of the issues on April 30? a. $2,580 b. $2,850 c. $2,931 (132,935 16.01] January 1, Ms BA2 started a small business buying and selling thread. She invested her redundancy money of $400,000 in the business, and, during the next six months, the following transactions occurred. quantity (boxes) [3) dispatch boxes value -a-- mum-a.- - _-E_- The thread is stored in an office Ms BA2 has rented, and the closing stock of thread, which was counted on June 30, was 500 boxes. Other expenses incurred, and paid for in cash, during the period amounted to $3,100. Required: (5.) Calculate the value of the material issues during the six-month period, and the value of the closing stock at the end of June, using the following methods of pricing (i) rst-in, rst-out, (ii) weighted average (calculations to two decimal places only) Calculate and discuss the effect each of the three methods of material pricing will have on the reported prot of the business, and examine the performance of the business during the first six-month period