TOPIC 2: MATERIALS

JUNE 2019
QUESTION 2
a. i. Assumption of EOQ – you can refer to your manual
ii. Advantages of an effective storekeeping system
- to ensure availability and sufficiency of materials for production at a lower
cost.
- To ensure materials are purchased in right quantity, right time and at right
price
- Prevention of stock wastage due to stock obsolescence/ stock theft

b. LIFO method

Date Receipt Issued Balance

June Qty Price RM Qty Price RM Qty Price RM
2019
1 Opening balance 2000 14.70 29400
1000 14.80 14800
2000 14.50 29000
8 5000 15.00 75000 2000 14.70 29400
1000 14.80 14800
2000 14.50 29000
5000 15.00 75000
12 5000 15.00 75000 2000 14.70 29400
2000 14.50 29000 1000 14.80 14800
18 2500 15.50 38750 2000 14.70 29400
1000 14.80 14800
2500 15.50 38750
21 Return to supplier 500 15.50 7750 2000 14.70 29400
1000 14.80 14800
2000 15.50 31000
24 2000 15.50 31000 2000 14.70 29400
1000 14.80 14800
29 1000 15.50 15500 Return to store 2000 14.70 29400
1000 14.80 14800
1000 15.50 15500
30 500 15.50 7750 2000 14.70 29400
1000 14.80 14800
500 15.50 7750
Closing stock 3500 51950
Cost of material issued to production = RM119,500
c. i. Demand = 100kg x 250 days = 25,000kg
ii. EOQ by Tabulation
Ordering cost = RM300/order
Holding cost = RM60/kg

No. of order 20 40 50 100

Order size 1,250 625 500 250
Ave. stock 625 312.5 250 125
Total OC 6,000 12,000 15,000 30,000
Total HC 37,500 18,750 15,000 7,5000
Total Cost 43,500 30,750 30,000 37,500

EOQ is at 500 kg of dates at the total cost of RM30,000.

JUNE 2018
QUESTION 2
a. i. Differences – refer to your manual
ii. Disadvantages of WAM – (1) Not accurate (2) Not accepted by Inland
Revenue Board
b. FIFO

Date Purchase Issue Balance

Qty Cost RM Qty Cost RM Qty Cost Amt
Mar 2080 5 10400
1
1 1080 5 5400 1000 5 5000

5 1200 5.3 6360 1000 5 5000

1200 5.3 6360

8 1000 5 5000 800 5.3 4240

400 5.3 2120

12 1500 5.4 8100 800 5.3 4240

1500 5.4 8100

15 800 5.3 4240 1500 5.4 8100

18 1300 5.4 7020 200 5.4 1080

19 150 5.4 810 350 5.4 1890

(RETURN)

23 2000 5.04 10080 350 5.4 1890

2000 5.04 10080

26 350 5.4 1890 550 5.04 2772

1450 5.04 7308

31 STOCK LOSS 30 5.04 151.20 520 5.04 2620.8

Cost of material used for production = RM32,168

c. EOQ
Demand = 1,200 x 2m x 2 = 4,800m
Carrying cost = 5% x RM10 = RM0.50
Ordering cost = RM40

Order size 1200 800 600

(meters)
Ave Qty 600 400 300
No. of purchase 4 6 8
order
Carrying cost 300 200 150
Ordering cost 160 240 320
Total cost 460 440 470
EOQ is at 800m of chiffon at the lowest cost of RM440
JANUARY 2018
QUESTION 2
a. Answer i and ii please refer your manual

b. FIFO

DATE RECEIPTS ISSUES BALANCE

NOV Qty Price RM Qty Price RM Qty Price RM
1 3000 2.80 8400

2 3000 3.10 9300 3000 2.80 8400

3000 3.10 9300

4 6000 3.20 19200 3000 2.80 8400

3000 3.10 9300
6000 3.20 19200

6 3000 2.80 8400 4500 3.20 14400

3000 3.10 9300
1500 3.20 4800

9 3000 3.20 9600 1500 3.20 4800

11 9000 3.30 29700 1500 3.20 4800

9000 3.30 29700

15 Return 600 3.20 1920 900 3.20 2880

9000 3.30 29700

19 900 3.20 2880

6900 3.30 22770 2100 3.30 6930

25 4500 3.35 15075 2100 3.30 6930

4500 3.35 15075

27 1500 3.30 4950 600 3.30 1980

4500 3.35 15075

30 600 3.30 1980

1680 3.35 5628 2820 3.35 9447

Closing stock = 2820 units @ RM 9447

c. i. EOQ
√2DO = √2 X 240000 X 550
H 412.50
= 800 units

ii. Number of purchase order = Demand/EOQ

= 240000 / 800
= 300 times
iii. Total ordering cost = Number of PO x cost per order
= 300 x RM550
= RM165000
iv. Total holding cost = Average stock x holding cost per unit
= 400 unit x RM412.50
= RM165000