ACCOUNTING FOR MATERIALS

PROBLEM 1- Norman Company

EOQ = 2 x 64,000 x 40
2
= 1,600 units

Ordering cost= 64,000 x 40

1,600
= 1,600

Carrying cost = 1,600 x 2

2
= 1,600

PROBLEM 2- Abner Company

a. EOQ = 2 X 13,000 X 200

5.20
= 5,200,000
5.20
= 1,000 units

b. Number of orders in a year

=13,000/ 1,000
=13 orders

C. Average inventory based on EOQ

= 1,000 / 2
=500

D. Total carrying cost

= 13 x 200
=P 2,600

Total ordering cost

= 13 x 200
= P 2,600
PROBLEM 6

1. FIRST IN – FIRST OUT

RECEIVED ISSUED BALANCE
1,600 X 6.00 9,600
5 400 X 7.00 2,800 1,600 X 6.00 9,600
400 X 7.00 2,800
9 400 X 8.00 3,200 1,600 X 6.00 9,600
400 X 7.00 2,800
400 X 8.00 3,200
16 800 X 6.00 4,800 800 X 6.00 4,800
400 X 7.00 2,800
400 X 8.00 3,200
24 600 X 9.00 5,400 800 X 6.00 4,800
400 X 7.00 2,800
400 X 8.00 3,200
600 X 9.00 5,400
27 800 X 6.00 4,800 200 X7.00 1,400
200 X7.00 1,400 400 X 8.00 3,200
600 X 9.00 5,400

Cost of material Issued = 4,800 + 4,800+ 1,400 = 11,000

Cost of ending inventory= 1,400+ 3,200+ 5,400 =10,000

2. AVERAGE
RECEIVED ISSUED BALANCE
1 1,600 X 6.00 9,600
5 400 X 7.00 2,800 2,000 X 6.20 12,400
9 400 X 8.00 3,200 2,000 X 6.50 15,600
16 800 X 6.50 5,200 1,600 X 6.50 10,400
24 600 X 9.00 5,400 2,200 X 7.18 15,800
27 1,000 X 7.18 7,180 1,200 X 7.18 8,620
Cost of material Issued = 5,200+ 7,180 = 12,380
Cost of ending inventory=8,620