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a) Bidii Enterprises is located at Kariobangi Light Industries area in Nairobi. The company manufactures...

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Accounting

a) Bidii Enterprises is located at Kariobangi Light Industries area in Nairobi. The company manufactures a product comex which is used in the building industry. The main raw material used in the manufacture of comex is material B4 2000.

The following information relates to material B4 2000.

Annual requirements:144,000 units

Ordering costs:Sh.12,500 per order

Annual holding costs:20% of the purchase price

Purchase price per unit:Sh.500

Safety stock requirement:None

Required:

(i)The economic order quantity.( 2 marks)

(ii)The number of orders needed per year( 2 marks)

(iii)Total cost of ordering and holding material B4 2000 per year.( 4 marks)

(b) A Company has provided the following data in respect of its major raw materials.

Maximum Consumption 1,200 units

Normal consumption 900 units

Minimum consumption 600 units

Lead time 4-6 weeks

Re-order Quantity 6,000 units

Required

i) Reorder level
ii) Maximum stock level
iii) Minimum stock level (7 marks)

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