Cost and Management Accounting chapter 3 solutions , second edition

1. UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST
RECEIPTS ISSUES BALANCE
DATE
Page 1 of 35

2. UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST
RECEIPTS ISSUES BALANCE
DATE
Page 2 of 35

3. FIFO
UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST
1 Jan 100 R5.000 R500
3 March 40 R5.000 R200 60 R5.000 R300
4 June 50 R5.500 R275 60 R5.000 R300
50 R5.500 R275
6 June 50 R6.000 R300 60 R5.000 R300
50 R5.500 R275
50 R6.000 R300
9 Sept 60 R5.000 R300 0 R5.000 R0
10 R5.500 R55 40 R5.500 R220
50 R6.000 R300
90 R520
Question 3.1
DATE
RECEIPTS ISSUES BALANCE
Q3.1 Page 3 of 35

4. LIFO
UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST
1 Jan 100 R5.000 R500
3 March 40 R5.000 R200 60 R5.000 R300
4 June 50 R5.500 R275 60 R5.000 R300
50 R5.500 R275
6 June 50 R6.000 R300 60 R5.000 R300
50 R5.500 R275
50 R6.000 R300
9 Sept 50 R6.000 R300 60 R5.000 R300
20 R5.500 R110 30 R5.500 R165
0 R6.000 R0
90 R465
a. B (R300 + R55)
b. C (R300 + R110)
c. A
DATE
RECEIPTS ISSUES BALANCE
Q3.1 Page 4 of 35

5. LIFO
UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST
1 Oct 500 R1.200 R600
200 R1.250 R250
8 Oct 600 R1.300 R780 500 R1.200 R600
200 R1.250 R250
600 R1.300 R780
20 Oct 600 R1.500 R900 500 R1.200 R600
200 R1.250 R250
600 R1.300 R780
600 R1.500 R900
29 Oct 600 R1.500 R900 400 R1.200 R480
600 R1.300 R780 0 R1.250 R0
200 R1.250 R250 0 R1.300 R0
100 R1.200 R120 0 R1.500 R0
R480
Question 3.2
DATE
RECEIPTS ISSUES BALANCE
Q3.2 Page 5 of 35

6. Q3.2 Page 6 of 35

7. WEIGHTED AVERAGE
UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST
1 Oct 700 R1.214 R850
8 Oct 600 R1.300 R780 1,300 R1.254 R1,630
20 Oct 600 R1.500 R900 1,900 R1.332 R2,530
29 Oct 1,500 R1.332 R1,997 400 R1.332 R533
R533
Small differences may occur due to rounding off.
DATE
RECEIPTS ISSUES BALANCE
Q3.2 Page 7 of 35

8. Receipts:
DATE UNITS UNIT COST TOTAL COST
1/3 5 R350.000 R1,750
1/3 19 R355.000 R6,745
7/3 18 R360.000 R6,480
13/3 -3 R360.000 (R1,080)
19/3 17 R370.000 R6,290
21/3 5 R375.000 R1,875
27/3 16 R365.000 R5,840
77 R362.338 R27,900
Issues:
5/3 13
10/3 15
22/3 21
25/3 -4
29/3 14
30/3 -2
31/3 6
63
Question 3.3
Q3.3 Page 8 of 34

9. Number of units in closing inventory:
Received 77
Issued -63
14
Value of closing inventory:
UNITS UNIT COST TOTAL COST
(a) 14 R365.000 R5,110
(b) 5 R350.000 R1,750
9 R355.000 R3,195
R4,945
© 14 R362.338 R5,073
Small differences may occur due to rounding off
Q3.3 Page 9 of 34

10. FIFO
UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST
1/3 5 R350.000 R1,750
19 R355.000 R6,745
5/3 5 R350.000 R1,750 0 R350.000 R0
8 R355.000 R2,840 11 R355.000 R3,905
7/3 18 R360.000 R6,480 11 R355.000 R3,905
18 R360.000 R6,480
10/3 11 R355.000 R3,905 0 R355.000 R0
4 R360.000 R1,440 14 R360.000 R5,040
13/3 -3 R360.000 (R1,080) 11 R360.000 R3,960
19/3 17 R370.000 R6,290 11 R360.000 R3,960
17 R370.000 R6,290
21/3 5 R375.000 R1,875 11 R360.000 R3,960
17 R370.000 R6,290
5 R375.000 R1,875
22/3 11 R360.000 R3,960 0 R360.000 R0
10 R370.000 R3,700 7 R370.000 R2,590
5 R375.000 R1,875
25/3 -4 R370.000 (R1,480) 11 R370.000 R4,070
5 R375.000 R1,875
27/3 16 R365.000 R5,840 11 R370.000 R4,070
5 R375.000 R1,875
16 R365.000 R5,840
29/3 11 R370.000 R4,070 0 R370.000 R0
3 R375.000 R1,125 2 R375.000 R750
16 R365.000 R5,840
Question 3.4
DATE
RECEIPTS ISSUES BALANCE
Q3.4 Page 10 of 34

11. UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COSTDATE
RECEIPTS ISSUES BALANCE
30/3 -2 R375.000 (R750) 4 R375.000 R1,500
16 R365.000 R5,840
31/3 4 R375.000 R1,500 0 R375.000 R0
2 R365.000 R730 14 R365.000 R5,110
14 R5,110
LIFO
UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST
1/3 5 R350.000 R1,750
19 R355.000 R6,745
5/3 13 R355.000 R4,615 5 R350.000 R1,750
6 R355.000 R2,130
7/3 18 R360.000 R6,480 5 R350.000 R1,750
6 R355.000 R2,130
18 R360.000 R6,480
10/3 15 R360.000 R5,400 5 R350.000 R1,750
6 R355.000 R2,130
3 R360.000 R1,080
13/3 -3 R360.000 (R1,080) 5 R350.000 R1,750
6 R355.000 R2,130
19/3 17 R370.000 R6,290 5 R350.000 R1,750
6 R355.000 R2,130
17 R370.000 R6,290
DATE
RECEIPTS ISSUES BALANCE
Q3.4 Page 11 of 34

12. UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COSTDATE
RECEIPTS ISSUES BALANCE
21/3 5 R375.000 R1,875 5 R350.000 R1,750
6 R355.000 R2,130
17 R370.000 R6,290
5 R375.000 R1,875
22/3 5 R375.000 R1,875 5 R350.000 R1,750
16 R370.000 R5,920 6 R355.000 R2,130
1 R370.000 R370
25/3 -4 R370.000 (R1,480) 5 R350.000 R1,750
6 R355.000 R2,130
5 R370.000 R1,850
27/3 16 R365.000 R5,840 5 R350.000 R1,750
6 R355.000 R2,130
5 R370.000 R1,850
16 R365.000 R5,840
29/3 14 R365.000 R5,110 5 R350.000 R1,750
6 R355.000 R2,130
5 R370.000 R1,850
2 R365.000 R730
30/3 -2 R365.000 (R730) 5 R350.000 R1,750
6 R355.000 R2,130
5 R370.000 R1,850
4 R365.000 R1,460
31/3 4 R365.000 R1,460 5 R350.000 R1,750
2 R370.000 R740 6 R355.000 R2,130
3 R370.000 R1,110
14 R4,990
Q3.4 Page 12 of 34

13. UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COSTDATE
RECEIPTS ISSUES BALANCE
WEIGHTED AVERAGE
UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST
1/3 24 R353.958 R8,495
5/3 13 R353.958 R4,601 11 R353.958 R3,894
7/3 18 R360.000 R6,480 29 R357.708 R10,374
10/3 15 R357.708 R5,366 14 R357.708 R5,008
13/3 -3 R360.000 (R1,080) 11 R357.083 R3,928
19/3 17 R370.000 R6,290 28 R364.926 R10,218
21/3 5 R375.000 R1,875 33 R366.452 R12,093
22/3 21 R366.452 R7,695 12 R366.452 R4,397
25/3 -4 R366.452 (R1,466) 16 R5,863
27/3 16 R365.000 R5,840 32 R365.726 R11,703
29/3 14 R365.726 R5,120 18 R6,583
30/3 -2 R365.726 (R731) 20 R7,315
31/3 6 R365.726 R2,194 14 R5,120
14 R5,120
Small differences may occur due to rounding off
DATE
RECEIPTS ISSUES BALANCE
Q3.4 Page 13 of 34

14. Receipts:
DATE UNITS UNIT COST TOTAL COST
1/10 500 R240.000 R120,000
3/10 150 R250.000 R37,500
7/10 70 R260.000 R18,200
8/10 -20 R250.000 (R5,000)
13/10 200 R280.000 R56,000
21/10 250 R265.000 R66,250
24/10 -50 R265.000 (R13,250)
28/10 250 R270.000 R67,500
1,350 R257.185 R347,200
Issues:
Date Units Sales price Total sales
11/10 400 R300.000 R120,000
16/10 200 R300.000 R60,000
20/10 -15 R300.000 (R4,500)
23/10 300 R300.000 R90,000
27/10 20 R300.000 R6,000
29/10 -15 R300.000 (R4,500)
890 R267,000
Question 3.5
Q3.5 Page 14 of 34

15. Number of units in closing inventory:
Received 1,350
Issued -890
460
Value of closing inventory:
UNITS UNIT COST TOTAL COST
FIFO 250 R270.000 R67,500
200 R265.000 R53,000
10 R280.000 R2,800
460 R123,300
LIFO 460 R240.000 R110,400
W/A 460 R257.185 R118,305
Small differences may occur due to rounding off
b. FIFO
Opening inventory R120,000
Purchases R227,200
Closing inventory (R123,300)
Cost of sales R223,900
Q3.5 Page 15 of 34

16. LIFO
Opening inventory R120,000
Purchases R227,200
Closing inventory (R110,400)
Cost of sales R236,800
Weighted average
Opening inventory R120,000
Purchases R227,200
Closing inventory (R118,305)
Cost of sales R228,895
c.
FIFO LIFO W/A
Sales R267,000 R267,000 R267,000
Cost of sales (R223,900) (R236,800) (R228,895)
Gross profit R43,100 R30,200 R38,105
Q3.5 Page 16 of 34

17. a.
FIFO
UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST
1/6 1,000 R4.000 R4,000
3/6 2,000 R5.000 R10,000 1,000 R4.000 R4,000
2,000 R5.000 R10,000
6/6 1,500 R5.500 R8,250 1,000 R4.000 R4,000
2,000 R5.000 R10,000
1,500 R5.500 R8,250
9/6 1,000 R4.000 R4,000 500 R5.000 R2,500
1,500 R5.000 R7,500 1,500 R5.500 R8,250
12/6 3,000 R4.500 R13,500 500 R5.000 R2,500
1,500 R5.500 R8,250
3,000 R4.500 R13,500
14/6 500 R5.000 R2,500
1,500 R5.500 R8,250
1,500 R4.500 R6,750 1,500 R4.500 R6,750
1,500 R6,750
Question 3.6
DATE
RECEIPTS ISSUES BALANCE
Q3.6 Page 17 of 34

18. LIFO
UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST
1/6 1,000 R4.000 R4,000
3/6 2,000 R5.000 R10,000 1,000 R4.000 R4,000
2,000 R5.000 R10,000
6/6 1,500 R5.500 R8,250 1,000 R4.000 R4,000
2,000 R5.000 R10,000
1,500 R5.500 R8,250
9/6 1,500 R5.500 R8,250 1,000 R4.000 R4,000
1,000 R5.000 R5,000 1,000 R5.000 R5,000
12/6 3,000 R4.500 R13,500 1,000 R4.000 R4,000
1,000 R5.000 R5,000
3,000 R4.500 R13,500
14/6 3,000 R4.500 R13,500 1,000 R4.000 R4,000
500 R5.000 R2,500 500 R5.000 R2,500
1,500 R6,500
DATE
RECEIPTS ISSUES BALANCE
Q3.6 Page 18 of 34

19. Weighted average
UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST
1/6 1,000 R4.000 R4,000
3/6 2,000 R5.000 R10,000 3,000 R4.667 R14,000
6/6 1,500 R5.500 R8,250 4,500 R4.944 R22,250
9/6 2,500 R4.944 R12,361 2,000 R9,889
12/6 3,000 R4.500 R13,500 5,000 R4.678 R23,389
14/6 3,500 R4.678 R16,372 1,500 R7,017
1,500 R7,017
Small differences may occur due to rounding off
b. EOQ =
=
= 8,000 units
DATE
RECEIPTS ISSUES BALANCE
Hpxi
DO
)(
2
25.0
800001002
R
xxR
Q3.6 Page 19 of 34

20. Average inventory = EOQ ÷ 2 + Safety inventory
= 8 000 units ÷ 2 + 0
= 4,000 units
Number of orders per year = Annual usage ÷ EOQ
= 10 times
Ordering cost per year = No. of orders x Cost of placing an order
= R1,000
Q3.6 Page 20 of 34

21. a. Reorder level = Max. usage x max. lead time
= 1 300 x 10
= 13,000 units
D
b. Max. inventory = Reorder level - (min. usage x min. lead time) + EOQ
= 13 000 - (600 x 5) + 40 000
= 50,000 units
D
c. Min. inventory = Reorder level - (ave. usage x ave. lead time)
= 13 000 - (1 000 x 7.5)
= 5,500 units
Question 3.7
Q3.7 Page 21 of 34

22. C
Q3.7 Page 22 of 34

23. (i) The order size for materials that will result in a minimisation of the costs of ordering inventory and carrying
inventory.
(ii) Those costs that result from having inventory on hand, such as rental of storage space, handling costs,
property taxes, insurance, and cost of funds invested in inventory.
(iii) Those costs associated with the acquisition of inventory, such as clerical costs and transportation costs.
(iv) The interval between the time that an order is placed and the time that the order is finally received from
the supplier.
(v) The point in time when an order must be placed to replenish depleted inventory; it is determined by
multiplying the lead time by the average daily weekly usage.
(vi) The difference between average usage of materials and minimum usage of materials that can reasonably
be expected during the lead time.
Question 3.8
Q3.8 Page 23 of 34

24. (a) Reorder point (no safety inventory):
Average weekly usage (units) 50
x lead time (weeks) 4
Reorder point (units) 200
(b) (i) Max. weekly usage (units) 60
Ave. weekly usage (units) 50
Difference 10
x Lead time (weeks) 4
Safety inventory (units) 40
(ii) Reorder point (units) from (a) 200
+ Safety inventory 40
Reorder point (units) 240
Question 3.9
Q3.9 Page 24 of 34

25. a. EOQ =
=
= 977.31 litres
b. No. of orders per annum = Annual usage ÷ EOQ
= 5 110 000 litres ÷ 977.31 litres
= 5 228.64 times
c. Ordering cost per year = No. of orders x cost of placing an order
= 5 228.64 orders x R0.10
= R522.86
Question 3.10
Hpxi
DO
)(
2
80.0)18.050.1(
)36514000(10.02
RxR
xxxR

3.10 Page 25 of 34

26. a. EOQ =
=
= 452.20 units
b. No. of orders per annum = Annual usage ÷ EOQ
= 96 000 units ÷ 452.20 units
= 212.30 times
c. Ordering cost per year = No. of orders x cost of placing an order
= 212.30 orders x R307
= R65,176.10
Question 3.11
Hpxi
DO
)(
2
271)15.0115(
)128000(3072
RxR
xxxR

3.11 Page 26 of 34

27. a. EOQ =
=
= 742.78 units
b. No. of orders per annum = Annual usage ÷ EOQ
= 100 000 units ÷ 742.78 units
= 134.63 times
c. Ordering cost per year = No. of orders x cost of placing an order
= 134.63 orders x R40
= R5,385.20
Question 3.12
Hpxi
DO
)(
2
10)09.050(
100000402
RxR
xxR

3.12 Page 27 of 34

28. a. EOQ =
=
= 351.47 units
b. No. of orders per annum = Annual usage ÷ EOQ
= 12 000 units ÷ 351.47 units
= 34.14 times
c. Ordering cost per year = No. of orders x cost of placing an order
= 34.14 orders x R35
= R1,194.90
Question 3.13
Hpxi
DO
)(
2
5)12.015(
12000352
RxR
xxR

3.13 Page 28 of 34

29. a.
UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST
01.Mai 500 R3.000 R1,500
06.Mai 600 R3.300 R1,980 500 R3.000 R1,500
600 R3.300 R1,980
11.Mai 600 R3.300 R1,980
200 R3.000 R600 300 R3.000 R900
13.Mai -20 R3.000 (R60) 320 R3.000 R960
16.Mai 800 R3.400 R2,720 320 R3.000 R960
800 R3.400 R2,720
23.Mai 800 R3.400 R2,720
200 R3.000 R600 120 R3.000 R360
28.Mai -100 R3.000 (R300) 20 R3.000 R60
Question 3.14
DATE
RECEIPTS ISSUES BALANCE
3.14 Page 29 of 34

30. b. Sales:
(800 - 20) x R9 R7,020
1 000 x R10 R10,000
R17,020
Cost of sales R5,840
Opening inventory R1,500
Purchases R4,400
Closing inventory (R60)
Gross profit R11,180
3.14 Page 30 of 34

31. a. EOQ =
=
= 1,249.00 units
b. No. of orders per annum = Annual usage ÷ EOQ
= 208 000 units ÷ 1 249 units
= 166.53 times
c. Safety inventory = Max. usage x min. delivery time
= 4 000 x 2
= 8,000
d. Ave. inventory = (EOQ ÷ 2) + 8 000
= (1 249 ÷ 2) + 8 000
Question 3.15
Hpxi
DO
)(
2
7)05.020(
)524000(302
RxR
xxxR

3.15 Page 31 of 34

32. = 8,624.50
e. Reorder level = max. usage x max. lead time
= 4 000 x 5
= 20,000
f. Max. inventory = Reorder level - (min. usage x min. lead time) + EOQ
= 20 000 - (3 000 x 2) + 1 249
= 15,249
3.15 Page 32 of 34

33. a. Receipts:
DATE UNITS UNIT COST TOTAL COST
02.Mär 60 R140.000 R1,750
09.Mär 60 R147.000 R8,820
120 R88.083 R10,570
Issues:
03.Mär 50
10.Mär 50
100
Number of units in closing inventory:
Received 120
Issued -100
20
Question 3.16
3.16 Page 33 of 34

34. Value of closing inventory:
UNITS UNIT COST TOTAL COST
20 R147.000 R2,940
b.
UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST UNITS UNIT PRICE TOTAL COST
02.Mär 60 R140.000 R8,400 60 R140.000 R8,400
03.Mär 50 R140.000 R7,000 10 R140.000 R1,400
09.Mär 60 R147.000 R8,820 70 R146.000 R10,220
10.Mär 50 R146.000 R7,300 20 R2,920
DATE
RECEIPTS ISSUES BALANCE
3.16 Page 34 of 34