Solution 1

Average LT 6
Max + min 12 (Max+Min) / 2 = Avg 6
Max - Min 4

So Max 8.00
Min 4.00

We know that ROL Max = Max consumption x Max Lead time

ROL 160,000
Max lead time 8
Max consumption 20,000 per day

Max Stock Level = ROL - (Min LT x Min Consumption) + EOQ

Max stock level 190,000
EOQ (90,000)
ROL (160,000)
Min LT x Min Consumption (60,000)
Min Lead Time 4.00
Min Consumption 15,000
Solution 2

Last week
Total Output 48,000
Labour 160
Per Labour output 300

Next week
Total Labour 120
Per Labour output 480
Output next week 57,600

Sales Last year 600,000

Units 48,000
Selling price 12.50
CM per unit (5.00) 240k/48k
Variable cost per unit 7.50
Labour cost per unit (1.00)
Other VC per unit 6.50

Next week
Selling Price 12.00 12.5 x 96%
Labour / unit (1.30) 1 + 30%
Other VC / unit (6.50)
CM per unit 4.20
Units 57,600
Total CM 241,920
Old CM (240,000)
Incremental CM 1,920

Weeks to cover cost of machine

Total Cost 160,000
Increamental CM per week 1,920
Weeks to cover cost 83.33
Solution 3

Annual Demand 371,200 Finished Goods

Raw Material Annual Deamand 2,969,600
EOQ 18,560
Ordering cost per order 1,160,000

HC per unit per year

Number of orders 160 2969600/18560
Annual OC 185,600,000
Annual HC 185,600,000 Same at EOQ
Average Stock 9,280 18,560 / 2
HC per unit / year 20,000

Per day Loss on stock out

Lost CM per unit 6,000
Daily demand 1,160 371,200 / 320
Total Daily Loss 6,960,000
Per day penalty 70,000
Loss per day of stock out 7,030,000

1 day's ss holding cost / year

Daily usage of RM 9,280 2,696,600 / 320
Holding cost / unit of RM / Yr 20,000
Annual HC 185,600,000

Comparison

Keeping 1 day of SS

Delayed orders 16.00 8.00

Delay in days 1.00 2.00

Safety stock days (1.00) (1.00)
- 1.00

Annual Stock out cost per day 7,030,000

Total stock out cost after 1 day ss 56,240,000 7030k x 8

Annual Holding cost 1 day ss 185,600,000
248,870,000
Keeping no safety stock

Delayed orders 16.00 8.00

Delay in days 1.00 2.00

Safety stock days - -
1.00 2.00
Total Days of Stock out 16 16 32
Annual Stock out cost per day 7,030,000

Total stock out cost after 1 day ss 224,960,000 7030k x 32

Annual Holding cost 1 day ss -
231,990,000

Conclusion
Its better not to keep any safety stock
Solution 4
A B
Selling Price 200.00 120.00
VC per unit (120.00) (60.00)
CM per unit 80.00 60.00

A B
Profit 210,000 (30,000)
FC (allocated) 750,000 750,000
CM Total 960,000 720,000
CM per unit 80 60
Units sold 12,000 12,000

Option 1

A B
Selling Price 200.00 120.00
VC per unit (129.00) (64.50)
CM per unit 71.00 55.50
Units 12,000 12,000
Total CM 852,000 666,000 1,518,000
Fixed Cost (1,275,000)
Profit 243,000 63,000
Additional profit
Option 2

A B
Selling Price 240.00 120.00
VC per unit (120.00) (60.00)
CM per unit 120.00 60.00
Units 10,000 12,000
Total CM 1,200,000 720,000 1,920,000
Fixed Cost (1,500,000)
Profit 420,000 240,000
Additional profit
Option 3

A B
Selling Price 240.00 120.00
VC per unit (129.00) (64.50)
CM per unit 111.00 55.50
Units 10,000 12,000
Total CM 1,110,000 666,000 1,776,000
Fixed Cost (1,275,000)
Profit 501,000 321,000
Additional profit
Highest profit in option 3
Solution 5
Solution 6
Solution 7

Budgeted Sales (Rs) 12,000,000

Budgeted Sales (Units) 30,000
Selling price 400
Actual Selling price 440
Actual sales (Rs) 12,672,000
Actual Sales Volume 28,800 12,672k / 440

Sales price variance Sales Vol variance

Sp 400.00 SQ 30,000
Ap 440.00 AQ 28,800
AQ 28,800.00 Std Profit 120.00
Variance 1,152,000 Fav Variance (144,000) Adverse

Material

Standard
Std Usage per unit 95.00 2,850,000 / 30000

Std per unit

Kgs Rate Cost
RM A 5.00 10.00 50.00
RM B 3.00 15.00 45.00 Bal Figr
8.00 11.88 95.00

MPV
Sp Ap AQ Var
RM A 10.00 9.50 160,000 80,000
RM B 15.00 14.25 80,000 60,000
Favoruable 140,000

MUV
SQ AQ Sp Var
RM A 144,000 160,000 10.00 (160,000)
RM B 86,400 80,000 15.00 96,000
Favoruable (64,000)

MMV
SM AM Sp Var
RM A 150,000 160,000 10.00 (100,000)
RM B 90,000 80,000 15.00 150,000
Favoruable 50,000
MYV
SQ AQ Sp Var
RM A 144,000 150,000 10.00 (60,000)
RM B 86,400 90,000 15.00 (54,000)
Favoruable (114,000)

Labour variances

Standard Labour cost per unit 125.00

Standard hours 5.00
Hourly rate 25.00

Actual Labour cost per unit 128.25

Actual hourly rate 27.00
Actual hours per unit 136,800

LRV LEV
Std Rate 25.00 Std Hrs 144,000
Actual Rate 27.00 Actual Hrs 136,800
Actual Hrs 136,800 Std Rate 25.00
Variance (273,600) Variance 180,000

Variable Overhead

Standard VOH cost per unit 60.00

Standard hours 5.00
Hourly rate 12.00

Actual hourly rate 12.50

Actual hours per unit 136,800

VExpV V. eff Variance

Std Rate 12.00 Std Hrs 144,000
Actual Rate 12.50 Actual Hrs 136,800
Actual Hrs 136,800 Std Rate 12.00
Variance (68,400) Variance 86,400
Solution 8
Solution 9

Part 1
Total hours 4,752
Per unit hours 36
Max units 132.00
Increase 66.00
198.00

A B C D E Total
VC 32 54 58 12 4 (160)
Assmbly (40)
Selling price 600
CM per unit 400

CM from 132 units 52,800

FC (41,712)
Profit 11,088

Part 2
A is out B is out C is out
A - 10 10
B 14 - 14
C 12 12 -
Per unit Hrs 26 22 24
Total Hours 4,752 4,752 4,752
Max units 182.77 216.00 198.00

Part 3

Total HOurs required 1,980 2,772 2,376 7,128

Available hour (4,752)
NO Yes Yes 2,376

B C
VC internal 54 58
Outsource 160 125
Additional 106 67
Hours per unit 14 12
Savings / hrs 7.57 5.58
Part 4
A B C D E Total
VC 32 54 125 12 4 (227)
Assmbly (40)
Selling price 600
CM per unit 333
Units 198
Total CM 65,934
FC (41,712)
24,222