1. Unnecessarily blocks working capital which could be profitably utilized somewhere else.
2. Overstocking needs more go down space, so more rent will have to be paid.
3. There may be loss due to obsolescence on account of overstocking.
4. There are chances of deterioration in quality because large stocks will require more time before
they are consumed.
5. There may be fear of depreciation in market values of the overstocked materials.
marto answered the question on February 26, 2019 at 09:22
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Distinguish between the following Incremental costs and Marginal costs,cost centres and object centres,job costing system and process costing system,relevant cost and relevant range,
(Solved)
Distinguish between the following Incremental costs and Marginal costs,cost centres and object centres,job costing system and process costing system,relevant cost and relevant range,
Date posted:
February 26, 2019
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Answers (1)
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Give the assumptions of break-even analysis.
(Solved)
Give the assumptions of break-even analysis.
Date posted:
February 26, 2019
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Answers (1)
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Give the requirements of an effective stock control system.
(Solved)
Give the requirements of an effective stock control system.
Date posted:
February 26, 2019
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Answers (1)
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Give the benefits of a standard costing system.
(Solved)
Give the benefits of a standard costing system.
Date posted:
February 26, 2019
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Answers (1)
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Give the classification of costs.
(Solved)
Give the classification of costs.
Date posted:
February 26, 2019
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Answers (1)
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Give the assumption of the economic order quantity (EOQ) model.
(Solved)
Give the assumption of the economic order quantity (EOQ) model.
Date posted:
February 26, 2019
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Answers (1)
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Give the major drawbacks of adopting a fixed budget:
(Solved)
Give the major drawbacks of adopting a fixed budget:
Date posted:
February 26, 2019
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Answers (1)
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Limitations of cost-volume-profit analysis in short term business planning
(Solved)
Limitations of cost-volume-profit analysis in short term business planning
Date posted:
February 26, 2019
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Answers (1)
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(i) Define the term value-chain analysis:
(ii) Describe the stages in the value chain of a manufacturing firm.
(Solved)
(i) Define the term value-chain analysis:
(ii) Describe the stages in the value chain of a manufacturing firm.
Date posted:
February 26, 2019
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Answers (1)
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Distinguish between Advanced Manufacturing Technology (AMT) and Material Resources
Planning (MRP).
(Solved)
Distinguish between Advanced Manufacturing Technology (AMT) and Material Resources
Planning (MRP).
Date posted:
February 26, 2019
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Answers (1)
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Evaluate four benefits that might accrue to an organisation that adopts Just In Time (JIT) stock
management system.
(Solved)
Evaluate four benefits that might accrue to an organisation that adopts Just In Time (JIT) stock
management system.
Date posted:
February 26, 2019
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Answers (1)
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Describe four benefits associated with life cycle costing
(Solved)
Describe four benefits associated with life cycle costing
Date posted:
February 26, 2019
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Answers (1)
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DXM Ltd. manufactures a cleaning detergent using chemicals that it buys from a number of
suppliers. In the past, DXM Ltd. has used a periodic review...
(Solved)
DXM Ltd. manufactures a cleaning detergent using chemicals that it buys from a number of
suppliers. In the past, DXM Ltd. has used a periodic review inventory control system with
maximum and re-order levels to control its inventory.
The Cost Accountant of DXM Ltd. has recommended adoption of just-in-time (JIT) system in
managing the company's inventory.
Required:
Describe how a just-in-time (JIT) system differs from periodic review control system
Date posted:
February 26, 2019
.
Answers (1)
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Makinika Ltd. manufactures a single product branded Zec. For the financial year commencing
I July 2014, the sales demand and the selling prices for Zec are...
(Solved)
Makinika Ltd. manufactures a single product branded Zec. For the financial year commencing
I July 2014, the sales demand and the selling prices for Zec are expected to be as follows:
Additional information:
1. Product Zec is produced at a constant rate of 45,000 units per quarter.
2. During the year, the excess production units are held in inventory at a cost of Sh.6 per unit per
quarter based on average inventory.
3. No inventory of product Zec is expected to be held on 1 July 2014.
4. The production costs per unit of product Zec are expected to be as follows:
5. The management is proposing to change the current system of production to the just-in-time
(JIT) system.
6. If the JIT system is adopted, and production level exceeds 45,000 units per quarter, the excess
units would have to be produced by working overtime. This would mean that the unit direct
labour and variable overhead costs of any units above 45,000 per quarter would increase by
50%.
7. No other costs would be affected by working overtime
Required:
Advise the management whether the just-in-time (JIT) system of production should be adopted.
Date posted:
February 26, 2019
.
Answers (1)
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Donta Ltd., a car manufacturer, wishes to determine a target cost for a new model of a car that
the company is about to launch in...
(Solved)
Donta Ltd., a car manufacturer, wishes to determine a target cost for a new model of a car that
the company is about to launch in the market. The price of the car will be set at Sh.4 million.
The company requires a 15% profit margin.
Required;-
The target cost for the car.
Date posted:
February 26, 2019
.
Answers (1)
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Explain the term target costing.
(Solved)
Explain the term target costing.
Date posted:
February 26, 2019
.
Answers (1)
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BS Limited manufactures a single standard product and operates a system of standard costing using a
fixed budget. As the company's assistant cost accountant, you are...
(Solved)
BS Limited manufactures a single standard product and operates a system of standard costing using a
fixed budget. As the company's assistant cost accountant, you are responsible for preparing the
monthly operating statements. Details from the budget, the standard product costs and actual results
for the month ended 31 May 2003 are given below:
Required:
The operating statement for the month of May, 2004 showing:
(a) The budgeted profit.
(b) Variances for direct materials, direct wages, overheads and sales.
(c) The actual profit.
Date posted:
February 26, 2019
.
Answers (1)
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Ujuzi Company Limited manufactures and sells one type of product Alpha . The standard
production costs of this item are as follows:
(Solved)
Ujuzi Company Limited manufactures and sells one type of product Alpha . The standard
production costs of this item are as follows:
The fixed overheads are allocated on the basis of a budgeted production volume of 3.500 units per
year.During the financial year ended 31 October 2004, 4,000 units of output were produced. The
actual production costs incurred during the year are given below.
Required:
a) Material price and usage variances.
b) Labour rate and efficiency variances
c) Total variable overheads variances
d) Fixed overheads volume variances
e) Identify two possible causes of;-
i) Material usage variance
ii) Labour efficiency variance
Date posted:
February 26, 2019
.
Answers (1)
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Ufundi Furniture Ltd. Manufactures a wide range of home furniture. Recently the company added
to its range a side board. The standard cost specification for each...
(Solved)
Ufundi Furniture Ltd. Manufactures a wide range of home furniture. Recently the company added
to its range a side board. The standard cost specification for each side board is given below:
The abnormal idle hours were 400 and the hours worked were recorded as 4,800 hours.
Required:
i) Material price variances (for both materials).
ii) Material usage variance (for both materials)
iii) Labour rate of pay variance.
iv) Labour efficiency variance.
v) Idle time variance.
(c) Suggest possible causes of the material variances.
Date posted:
February 26, 2019
.
Answers (1)
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State the advantages of using standard costs in the manufacturing industry.
(Solved)
State the advantages of using standard costs in the manufacturing industry.
Date posted:
February 26, 2019
.
Answers (1)