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UNIVERSITY OF TECHNOLOGY SCHOOL OF BUSINESS ADMINISTRATION INTRODUCTION TO COSTING ADDITIONAL MATERIALS QUESTIONS PART 1 Question 1 The manager of Hi-Pro feeds limited has been trying for the last six months to determine the economic order quantity for his inventory system. After a series of experiment the following order quantities and their related holding and ordering cost are presented. Order quantity Ordering Costs Holding Cost 5,000 units \$7,500 \$6,700 6,000 units \$6,800 \$7,200 4,500 units \$5,200 \$5,200 The Economic order quantity from the above data is: (a) 5,000 units (b) 6,000 units (c) 4,500 units (d) Cannot be determined from the above information. Question 2 There are 55,000 units of part XY5 on order with the suppliers and 32,500 units outstanding on existing customer orders. If the free stock balance is 26,000, what is the physical stock balance? Question 3 The annual demand for a certain stock item is 60 000 units. Ordering costs per order is \$1350 and carrying cost is 6.5% of the cost per unit . Each unit of the stock on average cost \$600. Compute the total cost of holding and carrying stock if the order quantity is 10 000 units. Question 4 The annual demand for a product sold by MM Ltd is 234,000 units. The lead time for delivery of the re- order quantity is 1-3 days. Assume that the, average daily usage is constant based on a 360 day year. When is the latest time that an order should be placed if current stock levels are 4550 units. Question 5

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