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ASSIGNMENT # 01
COST & MANAGEMENT ACCOUNTING (MGT402)
(Fall 2015)
Learning Objectives: The students are expected to learn and apply the economic order quantity model in different situations.
Case:
JIF Manufacturing buys leather sheets for making ladies hand bags and gents wallets from its suppliers. The leather has no color on them when bought. The assembly plant dies the leather with colors like black, brown, red and cream. Then it sews the colored bags and wallets. Finally leather bags and wallets are polished with an agent that depends on the color of the product. Basically there are three operations in the plant: Coloring, Stitching and Polishing. The activity times and set up times for these operations are given in minutes as follows:
Operation Coloring Stitching Polishing
Activity time 0.25 0.20 0.15
Set up time 30 20 45
Leather bags and wallets assemblies are processed in batches in all operations. The batch sizes are kept the same at all operations. Before a batch goes through an operation, the plant must set up the machines for that operation. For this purpose JIF Manufacturing requires 1,500 leather sheets per month. The cost of each leather sheet is Rs.27. The cost per order is Rs. 150 and inventory carrying charge works out to 20% of the average inventory.
a) How many leather tops can be colored in an hour with a batch size of 40?
b) Find the economic order quantity and ascertain the number of orders to be placed per year?
c) Would the Company accept a 2% price discount on supply of the 1,200 leather sheets

Fall 2015_MGT402_1.pdf

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Replies to This Discussion

i'm only confused in part (a). can anyone plz help...

Activity time for colouring = 0.25 min. so is this time for coloring one bag/top/wallet? or one whole batch?

will the set up time be included in part (a) calculation?

does batch size of 40 mean there are 40 leather tops?

Quick reply will be appreciated. plz dnt wait for last day.

share with us b and c part ??

I think 30 mins for set up time will be minus from an hour.

so   60 - 30 = 30 Mins

One unit of production require .25 mins for coloring

so  

30 / .25 = 120

This just my point of view

I did it in the same way Shakeel but I found something else on the internet. its like calculating batch wise (time for 1 batch of size 40)

dnt subtract 30 min pehle se. first, calculate time for 40 tops including setup time, then how many tops are colored in 1 min, then how many tops in 60 min.

Try it and let me know.

 

Maham sis, i will but at the moment i busy in doing other assignments and GDBs.

Dear Students Don’t wait for solution post your problems here and discuss ... after discussion a perfect solution will come in a result. So, Start it now, replies here give your comments according to your knowledge and understandings....

hello everyone: i am confused abt the part 2 and 3...... can anyone help.

Part a:
its really simple. requirement is how many leather tops can be colored...
one piece 0.25 min. => one batch of 40 will take = 0.25*40 = 10mins
Plus Setting up times of 30mins.
hence batch of 40 leather tops need 30+10= 40 mins.
that means on average 1 leather top need 1 min. (40min/40leather top)
that means 60 leather top can be done in 1 hour on average.
since the production is in batches, so we would go for averaging the production.




should i go further or not :P.... i guess not. abhi kafi time parra hai. keep trying...

Your answer is correct Asad but I didn't understand the concept of averaging the production. can u xplain what happens when the production is in batches?

in realistic, its illogical to calculate the no of color sheets in 1 hour, since 30 mins are setup time, 10 mins for coloring, remaining 20 mins would be consumed for next batch setup setup time.

the need or purpose for the question is to to answer that on average how many time is needed  for one sheet or in other words how many sheets can be prepared in an hour or shift or in a day. averaging concept under such scenarios lays the basis for budgeting, costing, standardization.
   

Thanks Asad

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