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Ama - chapter 1 doubt - urgent

Others 284 views 1 replies

Wasim Mohamed

Student

158 Points Posted on 07 May 2017

Guys, I have a doubt in question 31 of chapter 1 of AMA. The concept is Just in Time. I have attached the question and answer below.

In the comparison between current policy and JIT, 'opportunity cost' (line no. 3) and 'other carrying cost' (line no. 4) are taken. For both of these, the amount is calculated on 1000 packages or 100 packages while the requirement is 13000 packages in a year. Can someone please explain why 13000 is not taken ?

Also, the calculation goes like this: 1/2 * 1000 packages*140*15%. Can someone please explain why it's multiplied by 1/2 ?

Attached File : 623195 20170507112513 comb07052017095416.jpg downloaded: 128 times

Replies (1)

CA Rashmi Gandhi

Chartered Accountant

86505 Points Posted on 07 May 2017

Its carrying cost of maintaining the stock.

Generally carrying cost calculated on average stock. Thats why 1/2 is multiplied.

Secondly we maintain stock of goods which are ordered by us, here in existing policy me make 13 orders of 1000 packages each & in just in time 130 orders of 100 packages.
We have to maintain/carry stick of 1000 or 100 only not13000

So carrying cost calcuated on average basis on ordered qty