# ECONOMICS

## COST ACCOUNTING

### INTRODUCTION TO COST ACCOUNTING

 Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
From the following information, calculate the extra cost of material by following EOQ:Annual consumption:= 45000 units Ordering cost per order:= Rs. 10 Carrying cost per unit per annum:= Rs. 10 Purchase price per unit = Rs. 50 Re-order quantity at present = 45000 units There is discount of 10% per unit in case of purchase of 45000 units in bulk.
 A No saving B Rs. 2, 00, 000 C Rs. 2, 22, 010 D Rs. 2, 990
Explanation:

Detailed explanation-1: -Calaculation of the extra cost of material by following EOQ: First, EOQ = √(2AO/C ) = √(2×45000×10/10) = √(900000/10) = √90000 = 300 units Annual Cost under EOQ: Annual ordering Cost = No.

Detailed explanation-2: -A number of orders per year = Annual quantity demanded/ EOQ.

Detailed explanation-3: -ANSWER : ❖ If Annual Demand is 12, 000 units; Ordering Costis Rs. 90 per order and Inventory Carrying Cost is Rs. 15 per annum; then the Economic Order Quantity will be 379 units (approx).

Detailed explanation-4: -Carrying cost is calculated based on the insurance premium, depreciation, obsolescence, storage, preservation costs, and interest on value of stock held, including that of handling and other allied costs. This cost is also known as the possession cost.

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