Question

AL-FAIDA Ltd is a retail company operating within the TIJANIYA enclave. AL-FAIDA has been reviewing the adequacy of its stock control systems. During a period of such review, three products were identified for further investigations. The table below sets out the details relevant to the three products.

Product Type	Units in store (000)	Price per unit in store (GHS)	Min. weekly sales in GHS (000)	Normal weekly sales in GHS (000)	Max. weekly sales in GHS (000)
Fez	25	2.25	26	28	30
Khaolack	500	0.36	130	143	160
Samgoon	250	0.87	60	96	128

Gross margin is expressed as a % of sales and given as follows for each product:

Fez = 42; Khaolack = 46; Samgoon = 37.

Gross margin = sales – purchase price of product.

Outstanding order: Samgoon - order for 250,000 units placed 2 trading days ago. There are 6 trading days per week. All orders are delivered by suppliers into the central warehouse. The lead time is one week from the time order is placed. A further week is required by the retailer in order to transfer stock from central warehouse to stores. Both of these lead times can be relied upon.

Required:

Calculate for each product:

1. the minimum and maximum weekly sales units                      (3 marks)
2. the stock re-order level                                                            (3 marks)
3. the maximum stock control level                                             (3 marks)

Show all workings.

Marks allotted for workings                                                                       (4.5 marks)

(Total = 13.5 marks)

Question 3

You have just been appointed the cost accountant of AMINIYA MANUFACTURING LTD. The management of the company, prior to your appointment have always resorted to the work of consultants in costing and pricing products. At your interview, you had indicated to management the importance of cost and the various classifications of costs. The interview panel, very enthused with your explanations decided to engage your services as an employee- thus, your appointment as a cost accountant.

Required:

Write a memo to management detailing the various classifications of costs and provide two reasons for which it is important to classify cost.                                            

AL-FAIDA Ltd is a retail company operating within the TIJANIYA enclave. AL-FAIDA has been reviewing the adequacy of its stock control systems. During a period of such review, three products were identified for further investigations. The table below sets out the details relevant to the three products.

Product Type	Units in store (000)	Price per unit in store (GHS)	Min. weekly sales in GHS (000)	Normal weekly sales in GHS (000)	Max. weekly sales in GHS (000)
Fez	25	2.25	26	28	30
Khaolack	500	0.36	130	143	160
Samgoon	250	0.87	60	96	128

Gross margin is expressed as a % of sales and given as follows for each product:

Fez = 42; Khaolack = 46; Samgoon = 37.

Gross margin = sales – purchase price of product.

Outstanding order: Samgoon - order for 250,000 units placed 2 trading days ago. There are 6 trading days per week. All orders are delivered by suppliers into the central warehouse. The lead time is one week from the time order is placed. A further week is required by the retailer in order to transfer stock from central warehouse to stores. Both of these lead times can be relied upon.

Required:

Calculate for each product:

1. the minimum and maximum weekly sales units                      (3 marks)
2. the stock re-order level                                                            (3 marks)
3. the maximum stock control level                                             (3 marks)

Show all workings.

Marks allotted for workings                                                                       (4.5 marks)

(Total = 13.5 marks)

Question 3

You have just been appointed the cost accountant of AMINIYA MANUFACTURING LTD. The management of the company, prior to your appointment have always resorted to the work of consultants in costing and pricing products. At your interview, you had indicated to management the importance of cost and the various classifications of costs. The interview panel, very enthused with your explanations decided to engage your services as an employee- thus, your appointment as a cost accountant.

Required:

Write a memo to management detailing the various classifications of costs and provide two reasons for which it is important to classify cost.                                            

Answer 1

Required 1 Calculation of Sales price per unit Price per unit 2.25 Product type Fez Khaolack Samgoon GP% (as a % Cost Price as of Sales) a % of sales 42% 58% 46% 54% 37% 63% Sales Price per unit 3.88 0.67 0.36 0.87 1.38 Calculation of Maximum and minimum wekly sales units: Min. Weekly Min. Weekly Max. Weekly Max. Weekly Sales Price per sales in GHS sales in units sales in GHS sales in units Product type unit (000) (000) (000) (000) Fez 3.88 26 6.70 30 7.73 Khaolack 0.67 130 195.00 160 240.00 Samgoon 1.38 60 43.45 128 92.69 Required 2 Product type Normal Normal Sales Price per Weekly sales Weekly sales Lead time in unit in GHS (000) in units (000) weeks 3.88 28 7.22 2 0.67 143 214.50 2 1.38 96 69.52 2 Fez Re-order Level (000) 14.44 429.00 139.03 Khaolack Samgoon

Required 3 Product type Fez Khaolack Samgoon Max. Weekly Max Stock sales in units Lead time in control Level (000) weeks (000) 7.73 2 15.47 240.00 2 480.00 92.69 2 185.38 However since, there is an outstanding order of 250,000 units of Samgoon, the maximum stock control level for Samgoon for this week would be increased by 250,000 units in order to fulfill the order.

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