Category > ManagementPosted 19 Dec 2017My Price10.00
Calculate the amount of materials
CASE REPORT
Answer ONLY question 1, Calculate the amount of materials (steel alloy, aluminium alloy and titanium alloy) to be purchased for the months of October, November and December
CASE REPORT Management Accounting Page 1 It’s now September and you have completed the financial reports for Island Wheels Ltd. You were having lunch when you were approached by Mark and Patrick, the production supervisors. “Great job on the last report,” Mark started. “There’s something else that we need you to help us with. We are trying to determine how much materials we need to get for the next quarter. We always seem to either have way too much, or not enough. When we have too much, we logically order less for the next month. But then we run out and have to place an urgent order, which increases our costs.” “That’s right,” added Patrick. “John’s fuming about how we always have to pay extra for the materials. Is there a way you can help us determine how much materials we should be ordering?” “Sure,” you replied. “That’s what I am here for. I will have it to you by the end of the month.” As you walked off, you realise that you needed more information in order for you to prepare the information Mark and Patrick needed. And the first place to start is to first work out what materials were required for the bikes. You also needed to work out how many bikes were going to be produced. This is not getting any easier. You need to see Damian to find out the intended sales for the next quarter. You need more information from either Mark or Patrick about the materials used. The next day, you went to see Mark and he provided you with the materials requirements for the bicycles (This can be found in Appendix A.) He also provided you additional information as follows: Steel alloy costs $250 per kilogram. This is generally a common alloy used by most manufacturers and is readily available from many different suppliers. The company has several suppliers of steel alloy that it uses and all of them charge the same price. Quality across the preferred suppliers is similar and as such, there is no one single supplier that comes across as being the best. As such, it has been decided that there is no necessity to have a large inventory of steel alloy. Therefore, the decision by top management is to hold only 5% of the next month’s requirements in ending inventory every month. Currently there is 24 kg of the steel alloy in the opening inventory for October.
