Page 70 - DCOM202_COST_ACCOUNTING_I

Cost Accounting – I

Notes O = Ordering cost per order = $ 60
Sine the total cost at 2,000 units lot size is lowest, it is the optimal quantity to buy.

Example:
Calculate EOQ
Annual requirement 1600 units

Cost of materials per unit `40
Cost placing and receiving `50
Annual carrying cost of inventory 10% on value
Solution:
2AO
Economic Ordering Quanitity (EOQ) =
I
2 × ×1600 ` 50
EOQ = = 200units
10 on `% 4 40

Example:
Calculate EOQ
Consumption during the year 600 units
Ordering cost ` 12 per order

Carrying cost 20% on price
price per unit ` 20
Solution:

2AO
Economic Ordering Quantity (EOQ) =
I
2 × ×600 ` 12
EOQ = = = 60units
20 on `% 20

Example: The following data given to you from the accounts of a company for the year
2008:
Cost of opening stock of material = ` 40,000

Cost of closing stock of material = ` 80,000
purchase of material during 2008 = ` 5,00,000
From the above, compute:
(i) Cost of average stock of material,

(ii) Materials or stock turnover ratio, and
(iii) Average inventory holding.

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