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PUNJNAD Textile Industries (PTI) – a privately owned textile spinning unit is engaged in yarn manufacturing
since its incorporation. The unit produces high quality yarn which is sold out immediately like a hot cake. 5
years back, Mr. Entrepreneur - the owner of PTI had signed a contract with a local cotton supplier – Mr.
Supplier for supplying fine quality cotton bails to PTI as per specified requirement for five years at a cost of
Rs. 500 per bail. PTI estimated its requirement of 12,500 cotton bails per year for smooth operations. Both the
owner and the supplier were happy for signing the contract and a feeling of earning the good amount of profit.
Mr. Entrepreneur also estimated Rs. 2,000 as cost on issuing every new order and 10% as carrying and storage
cost associated with the inventory.
Mr. Supplier successfully supplied the cotton bails to PTI for 4 years but in 5th year of the contract, due to
heavy flood, cotton crops could not be reaped at full. But, due to the signed contract with PTI, Mr. Supplier
managed to supply cotton bails to PTI as per the agreed specification and completed the contract period
This year, due to bumper cotton crop in the region, Mr. Supplier has desired to renew the cotton supply
contract with the condition to supply 25% extra bails over the previous contract for the next 5 years. Mr.
Entrepreneur as satisfied with the cotton quality supplied earlier is considering this new option and has called
upon his manager costing – Mr. Management Accountant to compare the proposal with the contract just
ended. The manager has advised him to reject the proposal as extra quantity purchased would increase the
carrying and storage cost by 2%.
Being a student of cost & management accounting you are asked to calculate the following:
1. The most economical order quantity in case of both the proposals (current as well as previous)
2. The total ordering cost which has to be borne by PTI on both the proposals (current as well as
3. The total Carrying cost which has to be borne by PTI on both the proposals (current as well as
4. Using the order quantities, total ordering cost and total carrying cost calculated above; calculate the
total cost for both proposals. Also suggests the most suitable proposal for PTI on total cost basis.

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Replies to This Discussion

sure jst 5 mins...i will post it here..


yha kaya ha?

thanks rizwan Bro aj to yea assignment he sara din ly gae h kuch or perha ni h isi terha fin 621 ke assignment mn confusion chal raha h per wo to phr easy h per iss mn to khichri bnti ja rai h 

bas aise hi hota hai...  dukh is baat ka hai k assignments ki grading sirf 10% hai... lekin ye dete itni mushkil hain k poora poora din chala jata hai  poore din men 1 sbject ki tayari ho jati hai...but ye log nahi samjhte  ab jo job holders hain ya koi house wife hai ya koi aur jo itna time nahi de sakte un k liye kitni problem hai...but ye bat ye ssochte hi nahi  khair bas 5more mins...& i will upload sol...

bro ho geee coplet ya abhi nhi

maughy iss ma thora masla aa raha ha jo app ny 5 cy multiply karny ka kha ha

 + ((( Mἷṩṩ ҭᾄὗʀᾄṩ ))) ker di hai jaise mujhe samjh ai & apni submit bhi ker di...baqi ab jb result ae ga tab pata chale ga  

kahan job kerti ho ap??

hmm thanks a lot i am waiting.

i am still wating

ho gae....em posting it in a min...

we all are waiting for correct idea

ho gee


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