UNIVERSITI TEKNOLOGI MARA

COST AND MANAGEMENT ACCOUNTING - ACC416

SEMESTER OCTOBER 2022 – FEBRUARY 2023
TUTORIAL 2A - MATERIALS (Stock Levels & EOQ)
1. JULY 2021 (Q 2B)

Lambada Household manufactures smart mopping machine for domestic

market. One of the components used in making the smart mopping machine
is D239 microchips, which are imported from India. The monthly usage of the
D239 microchips is 250 units. Below is the cost related to D239 microchips.

RM
Purchase price 75 per unit
Shipping and delivery cost 175 per order
Requisition cost 25 per order
Storage cost 1.50 per unit
Insurance and security 2% per annum of inventory value

Required:

a. Determine the annual demand of D239 microchips.

b. Calculate the ordering cost per order and holding cost per unit.
c. By using tabulation method, identify the Economic Order Quantity
(EOQ) with the number of orders given at 2, 5 and 6 times.

2. DEC2019 (Q 2B)

Sinar Mutiara Sdn Bhd produces a variety of watches. One of the components used
in making the watch is XM leather which obtains from Korean supplier at the cost of
RM50 per unit. The monthly usage of XM leather is 200 units. The company decided
to limit the number of orders to two times per annum to minimize its total cost.

The following data is made available:

• Delivery cost is RM125 per order.

• Administration cost is RM20 per order.
• Storage cost for keeping the leather properly and to ensure its quality is RM5.00
per unit.
• Insurance and security fees are RM2.00 per unit.
• Interest charges is estimated at 5% of the purchase’s price.
Required:

i. Calculate ordering cost per order.

ii. Calculate holding cost per unit.
iii. Tabulate the relevant total cost of XM leather for the number of orders of 2, 4,
6 and 8 times per year.
iv. Based on your answer in B(iii), determine the economic order quantity (EOQ)
that minimizes the total cost.

3. JULY 2020 (Q 2B)

Kerawit Maju Sdn Bhd manufacture ‘Sambal Berapi’ located in Tuaran, Sabah.
They normally produced 320,000 unit sambal annually. ‘Sambal Berapi’
requires 0.04 kilogram of shrimp paste for every unit of ‘Sambal Berapi’. The
price paid for the shrimp paste cost at RM18 per kilogram. The administration
cost to place an order is RM10 and delivery cost is RM40 per order. The
carrying cost of the shrimp paste is 10% of the purchase price while the
breakage cost is estimated at RM0.20 per kilogram. Kerawit Maju Sdn Bhd is
planning to use economic order quantity model for the current year.

Required:

i. Calculate the Economic Order Quantity (EOQ) of the shrimp paste using the
formula method.
ii. Calculate the total cost (carrying and ordering cost) if Kerawit Maju Sdn Bhd
were to order the shrimp paste at EOQ.

4. JUNE 2019 (Q2B)

Tumpik Restaurant is a famous restaurant in Mukah which specializes in selling

the local pancake using the raw sago. It operates 300 days in a year. The
restaurant requires at least 25 kg of raw sago every day to produce the local
pancakes. The daily consumption of raw sago is between 120 kg – 200 kg.
Each kilogram of raw sago cost RM5.00 and estimates the holding cost is 10%
of the purchase price. The freight cost is RM1.00 per order to deliver the raw
sago from the suppliers to the restaurant. The ordering will take about 3-5
days.

Required:

Calculate the followings inventory control level for raw sago:

i.Economic Order Quantity (EOQ)

ii.Reorder Inventory Level
iii.Maximum Inventory Level
iv.Minimum Inventory Level