Determine the total costs of stocks

Assignment Help Managerial Accounting

Reference no: EM133122690

QUESTION ONE
Halwings Group Limited wishes to achieve excellent stock management so as to achieve a marvelous profit this year. Its management estimates the demand for its products to be 1000 units per annum, with a purchase price of shs.10 per unit, a holding cost of shs.0.75 per unit and ordering cot of shs.15 per order. The supplier of the stocks has presented Halwings Group Limited with the following range of prices of the stocks:

	Quantity	Price Per
Order size (in units)	Discount	Unit (Shs)
	(%)
0 - 99	0	10
100 - 199	1	9.9
200 - 399	2	9.8
400 - 599	4	9.6
600 - 799	5	9.5
800 - 899	5	9.5
900 - 999	5.5	9.45

Due to its storage capacity, the company can only purchase an amount of up to 600 units. Currently, the company is purchasing at optimum stock quantity to enable it achieve its objectives. The management is considering whether to shift from the current stock purchase policy to purchase the maximum stocks.
Required;

a) Calculate the current EOQ in units.
b) Determine the total costs of stocks that arise due to the EOQ purchased (include the discount opportunity costs).
c) Advise the company whether it should change its policy.

QUESTION TWO

Corin Company manufactures a product called Corfic. Pertinent cost and revenue data relating to the manufacture of this product are given below:

	Shs
Selling price per unit	66
Variable production cost per unit	44
Variable selling cost per unit	4
Fixed production cost (total)	Shs.200,000
Fixed selling and administrative cost (total)	Shs.99,000

Required:

a) Calculate the break-even sales level in shillings;

b) Suppose the company desires to make a profit of shs.195,000, what should be the output in units?

c) A new machine, which is more efficient, is installed. This machine increases the fixed production cost by 20% but reduces the variable production cost per unit by 30%. What is the new break-even point in sales revenue?

Reference no: EM133122690

Questions Cloud

Determine the amount recorded for fontaine capital account : Fontaine invests a building that has a market value of $356,000 and a $128,000 note payable. determine the amount recorded for Fontaine Capital account

Distinction between a stock price and its intrinsic value : Can you assist in creating a portfolio of five to eight stocks that demonstrate diversified risk. List the stocks along with their current price and previous 1-

What is barber return on equity : The partnership had net income of $156,000 for the year. Barber withdrew $65,000 during the year and Atkins withdrew $58,000. What is Barber's return on equity

Investments earn an annual interest rate : Assume the total cost of a college education will be $525,000 when your infant child enters college in 17 years. Your are fortunate in that your uncle has just

Determine the total costs of stocks : Calculate the current EOQ in units and Determine the total costs of stocks that arise due to the EOQ purchased (include the discount opportunity costs)

Transparency of the fees charged by financial institutions : Describe the transparency of the fees charged by financial institutions for foreign currency transactions.

Prepare a schedule that shows the total differential costs : Accepting Trailblazers's offer would eliminate annual fixed overhead of $39,550. Prepare a schedule that shows the total differential costs

Prepare the adjusting entries for the month of april : Provided $670 of services to customers who had paid at the beginning of the month. Prepare the adjusting entries for the month of April

Correlation of the returns on the corporate bond fund : You have $10,000 to invest in a combination of a risk-free asset (), an S&P 500 index fund (S), and a corporate bond fund (B) with the following properties:

User Account

All Pages