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ASSIGNMENT QUESTION
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
successfully.
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%.
REQUIREMENT:
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
previous)
3. The total Carrying cost which has to be borne by PTI on both the proposals (current as well as
previous)
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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i replied ur inbox msg..chk that...

and 62500 previous proposal ki required units hain... jo k next proposal mein 25% increase ho jae gi so 62500*25% = 62500+15625 = 78125

use calculator my dear.. :) 

62500 ka 25% kitna banta hai....us k liye we multiplied 62500 with 25% & wo 15625 banta hai...so then we will add 15625 in 62500 which means next proposal ki required units 25% increase kerne se 78125 ho jae gi...got that?? 

+ ((( Mἷṩṩ ҭᾄὗʀᾄṩ ))) LOL IN SHA ALLAH...ho jae gi....otherwise em here..  fata fat karen time is very short now 

 EOQ = (2(Rq*Co/Uc*Cc) ^ (1/2)

yeah formula kahan say ayya g?

ye formula handouts mein hai if u see on page 56-57...

Dear all, 1 problem may phans gaya hon...........wo ye hay kay Mr. Supplier ye to bol raha hay kay 25% extra bails add hon ge previous contract kay mukblay but wo ya nahi bol raha kay 2% carrying cost bhe increase kar raha hon previous contract kay mukblay may. ye to Mr. Management Accountant suggest kar raha hay Mr. Entrepreneur ko kay ager quantity 25% increase ke to 2% carrying cost bhe increase ho ge...... 

jitna time mein ne is saray thread ko parhne mein lagaya ha 19 pages 

shayad handout pe lagaya hota to khud solve kar leti.

handout say 19 page parh kr bhi apsay y shaid hi solve ho. u have calucalted it by 12500 or 62500?

me i am solving agr apk pass koi idea hay to share it kyokay dout is main hay kay units knsay lainay hain125oo or 62500

sab alag batain kr rahay hein.

or total cost to koi bhi sahi nahi bata raha k kaise calc krna ha.

as per my understanding it should be calc as;

Total cost for the Previous Proposal:

= Total Unit Cost + Total Ordering Cost + Total Carrying Cost

total ordering cost or total carrying cost ko add kro tou total cost a jaye ge

i posted with following results

Proposals EOQ Total Ordering Cost Total carrying Cost Total Cost Per Unit Cost
Previous          1,000                            25,000                        312,500          337,500                     27
Current          1,021                            30,600                        468,780          499,380                     32

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