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ModelAnswersSeries32009(3017)
LCCIInternationalQualifications
CostAccountingLevel3
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Forfurtherinformation
contactus:
Tel.+44(0)[email protected]
www.lcci.org.uk
CostAccountingLevel3Series32009
Howtousethisbooklet
ModelAnswershavebeendevelopedbyEDItoofferadditionalinformationandguidancetoCentres,teachersandcandidatesasthey prepareforLCCIInternationalQualifications. Thecontentsofthis
bookletaredividedinto3elements:
(1) Questions reproducedfromtheprintedexaminationpaper
(2) ModelAnswers summaryofthemainpointsthattheChiefExaminerexpectedtoseein theanswers toeach question inthe examinationpaper,plusafullyworkedexampleorsampleanswer(whereapplicable)
(3) HelpfulHints where appropriate, additional guidance relating to individualquestionsortoexaminationtechnique
Teachersandcandidatesshouldfindthisbookletaninvaluableteachingtoolandanaidtosuccess.
EDI provides Model Answers to help candidates gain a general understanding of the standardrequired.ThegeneralstandardofmodelanswersisonethatwouldachieveaDistinctiongrade.EDIacceptsthatcandidatesmayofferotheranswersthatcouldbeequallyvalid.
EducationDevelopmentInternationalplc2009
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Page1of17
Allrightsreserved;nopartofthispublicationmaybereproduced,storedinaretrievalsystemortransmittedinanyformorbyanymeans,electronic,mechanical,photocopying,recordingorotherwisewithoutpriorwrittenpermissionofthePublisher. Thebookmaynotbelent,resold,hiredoutorotherwisedisposedofbywayoftradeinanyformofbindingorcover,otherthanthatinwhichitispublished,withoutthepriorconsentofthePublisher.
QUESTION1
Acompanyusesthreedifferentrawmaterials(RM1,RM2&RM3)whichitobtainsfromanoutsidesupplier.Thefollowinginformationisprovidedrelatingtoeachrawmaterial:
RawMaterialRM1
Balanceinstoresiscurrently250kgStockonorder1000kgAllocatedstockis350kg
RawMaterialRM2
Dailyusagevariesbetween240and360kgLeadtimefordeliveryvariesbetween15and21days.Orderquantityis10,000kg
RawMaterialRM3
Orderquantity1,000kgPurchaseprice2.00perkgMonthlyusage1,500kgSafety(buffer)stock1,000kg
Orderingcosts250perorderStockholdingcostsare20%oftheaveragestockholdingperannum.Thesupplierhasofferedadiscountoffthepurchasepriceiftheorderquantityisincreased.Detailsareasfollows:
OrderQuantity Discount1,000kg -1,500kg 5%3,000kg 7.5%
REQUIRED
(a) ForrawmaterialRM1calculatethefreestockcurrentlyavailable.(2marks)
(b) ForrawmaterialRM2calculate:
(i) thereorderlevel(ii) theminimumandmaximumstockcontrollevels.
(6marks)
(c) ForrawmaterialRM3determinetheorderquantitythatwouldminimisethetotalannualcosts.
(8marks)
(d) Brieflyexplainthemeaningof:
(i) Re-orderlevel(ii) Allocatedstock(iii) Freestock.
(4marks)
(Total20marks)
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3017/3/09/MA Page2of17
3017/3/09/MA Page3of17
MODELANSWERTOQUESTION1
(a) RawmaterialRM1
Freestock=Stockbalanceinstores+Stockonorder-Allocatedstock
Freestock=250kg+1000kg-350kg=900kg
(b) RawmaterialRM2
(i) Reorderlevel
=maximumusagexmaximumleadtime
=360x21 = 7,560kg
(ii) Minimumstockcontrollevel=Re-orderlevel-(averageusexaverageleadtime)
=7,560-(300x18)= 2,160kg
Maximumstockcontrollevel
=Re-orderlevel-(minimumusexminimumleadtime)+re-orderquantity
=7,560-(240x15)+10,000=13,960kg
(c) RawmaterialRM3
Quantitytominimiseannualcosts
Order quantity(kg) 1,000 1,500 3,000
Usageperyear(kg) 18,000 18,000 18,000
Number of orders per year 18 12 6
Averagestock [W1] 1,500 1,750 2,500
Material cost per kg() 2.00 1.90 1.85
Ordering costs() 4,500 3,000 1,500
Stock holding costs() 600 665 925
Total material cost 36,000 34,200 33,300
41,100 37,865 35,725
Order3,000kg,atadiscountpriceof1.85perkg,sixtimesperyear
[W1]Averagestock=orderquantity+safetystock
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