Management Accounting for Engineers Lecture 4

Qty Ordered	200	250	800	2000	4000
Purchasing Cost	24000	23600	23200	22800	22400
No Of Order	20	16	5	2	1
Ordering Cost	120	96	30	12	6
Average Size of order	100	125	400	1000	2000
Inventory Carrying Cost per Unit	1.2	1.18	1.16	1.14	1.12
Inventory Carrying Cost	120	147.5

Maximum Level

Maximum Level = Re order level + re order qty - min rate of consumption $\times$ min re order period

Minimum Level = Re-order level - ( normal rate of consumption ) $\times$ Normal re order period.

Re order level = Max rate of consumption $\times$ Max Re order period lead time

	A	B
Re order Level	2700	1800
Max Consumption $\times$ Max. Re Order Period	450 $\times$ 6	450 $\times$ 4
Minimum Level	1200	900
ROL - ( Normal Consumption $\times$ Normal Re order period )	2700-(300 $\times$ 5)	1800-(300 $\times$ 3)
Maximum Level	4500	5100
ROL + ROQ - ( Min Consumption $\times$ Min. Re Order )	2700 + 2400 - ( 150 $\times$ 4 )	1800 + 3600 - ( 150 $\times$ 2 )
Maximum Level	4500	5100
ROL + ROQ - ( Min. Consumption $\times$ Min. Re order Period )	2700+2400-(150 $\times$ 4)	1800+3600-(150 $\times$ 2)

Net Profit
1. Sales XX
2. Less Variable Cost XX
3. Contribution XX
4. Less Fixed Cost XX
5. Net Profit
P/V Ratio ( Profit Volume Ratio ) = $\frac{co n t r ib u t i o n}{s a l es}$ $\times$ 100
Break Even Point Value = $\frac{F i x e d C os t}{P / V}$
BEP Units = $\frac{F i x e d C os t}{co n t r ib u t i o n p er u ni t}$
Sales ( Value ) = $\frac{Fixed Cost + Net Profit}{P / V}$
Sales ( Unit ) $\frac{Fixed Cost + Net Profit}{Contribution Per Unit}$
Margin of Safety = $Total Sales - BEP Sales$
Margin of safety = $\frac{P ro f i t}{P / V}$

Solution 1
1. Bep Value
  1. Bepp Value = $\frac{Fixed Cost}{P / V}$ = $\frac{20 , 000}{25%}$ = $80, 000$
2. Bep Units = $\frac{Fixed Cost}{Contribution Per Unit}$ = $\frac{20 , 000}{5}$ =4000
3. WN : P/V = $\frac{P}{V}$ =