ACCA F2 Management Accounting(INT)

Transcription

1 ACCA F2 Management Accounting(INT) Sample Study Note For exams in June2014 1

2 Lesco Group Limited, April 2015 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of Lesco Group Limited. 2

3 Sample Note Content: Product Summary... 4 Live online course timetable... 5 Main study note content [Total Pages: 120]... 6 Stock management... 7 Please note: This is just the sample study note extracted from the main study note in your tuition study [This tuition study note is consistent in basic/super/gold package]. There would be more chapters in the main study note covering the whole ACCA syllabus. You can also take a look at the content within the main study note below: 3

4 Product Summary content Basic Super Gold Oxford Brookes BSc in Applied Accounting package package Package ACCA HD quality super tuition videos ACCA HD quality super revision videos ACCA Live online tuition(4sessions) ACCA Live online revision(14hours) ACCA Mock exams(with tutor mark) ACCA Tutor support ACCA Electronic study note ACCA Student online forum Pass Guarantee ACCA Final revision mock exam paper ACCA Super Live online session (20-30hours) ACCA Super Live online revision (Super 3 days) ACCA 1V1 Career Advice ACCA Extra exam techniques demonstration Live online mentoring 4

5 Live online course timetable Live session/revision for F123 5

6 Main study note content [Total Pages: 120] 6

7 Stock management Stock ordering process Stock management in detail When to order? re-order level How much to order?-minimize costs(eoq) How much to hold? max and min holding Free stock 7

8 Stock ordering process: Purchase requisition Purchase order Goods received Pay Update the account Purchase requisition form (warehouse) Purchase order note (purchasing department) Delivery note/goods received note (enter stock details into a/c system) Invoice checked (supplier) Decrease payable (finance department) Goods received note: (we record stock details into the accounting systemmovement in inventory) Book stock: stock per accounting records Theoretically the same Different? Reasons: 1, Theft 2, Human error(wrong information into a/c system) 3, Timing difference(order from supplier but takes time to enter into accounting system) Physical stock: actual stock in the stores department 8

9 Stock management 1, when do we place an order with the supplier? Answer: when stock comes down to re-order level 2, How much inventory do we place each time? Answer: EOQ 3, how much stock do we expect to have in the warehouse? Answer: 1, maximum amount of stock we expect to hold? 2, minimum/buffer stock 4, free(available) stock Stock available to fulfill needs of users =physical stock + stock on order stock committed to existing customer orders 9

10 1, Re-order level: Suppose you run a company and you plan to resell the high fashion clothes to your customers. The estimated demand you re going to sell per year is 1,200 clothes. You won t purchase clothes from other factory first of 1,200 because there s uncertainty maybe customers would not buy from you. So you would like to order clothes monthly. So there s suggestion that when your stock within warehouse falls below 50clothes then you should re-order from supplier, is this right? Well to do this we need to calculate the Lead time(period of order time and receive time) Usage(the clothes you re to sell in this period) For the re-order level we should calculate using : MAX lead time X MAX usage Because we are considering the worst case scenario: Maybe there would be delay for the goods arrived Maybe there would be high demand by customers during this period. The lead time and usage would be an estimate by management in the real world and this is according to their industry experience. Example: MAX lead time is 5days ; MAX usage(sold) per day is 20clothes So when clothes falls below 5X20=100clothes then we should re-order from suppliers. 10

11 2,How much stock should we order? (50 units? 100 units?) Idea: minimize cost with ordering stock Cost related: Stock holding cost (warehouse, security, people hired) Storage facility Warehouse staff Deterioration costs The higher the stockholding costs then the higher annual holding costs Annual holding cost = Q 2 X Ch Average stock holding cost of holding one unit per year Stay in warehouse Stock ordering costs Admin costs Delivery costs The more orders placed then the higher annual ordering costs Annual ordering cost= D Q X Co D: Annual demand Q: Oder quantity Co: cost of placing one order 11

12 EOQ: (Economic Order Quantity) Oder quantity which minimizes: Annual holding cost + annual ordering cost Annual holding costs Annual ordering costs EOQ Q: annual holding cost and annual ordering cost Ch= $2 Co= $80 Demand =5,000 units Calculate the annual holding costs and annual ordering costs: 1, 50 units per order 2, 1,000 units per order 12

13 Q how much stock we order introduction Ch=$1.5 Co=$10 Demand=10,000 units 13

14 Q EOQ Quantity required is 32,000 items per annum. Order costs are $15 per order. Each unit of inventory is currently costs $40. Inventory holding costs are estimated at 3% of inventory value per year. Required: Calculate the economic order quantity (EOQ). 14

15 Q EOQ (bulk discount) Price of each product =$1,000 Demand by customers per year=65,000units Co=$2500 per order Ch=$300 per year If the order quantity exceeds 2,000units then 2%discount given: New purchase price=1000x98%= 980 Required: (i)calculate the EOQ before the quantity discount. (i)whether the company should take the discount. 15

16 3, How much stock do we expect to have in the warehouse? Buying stock is not cheap and we can put this money into bank to earn interest if we think stock we bought cannot be sold. This is a concept of opportunity cost of capital. So buying stock requires funding and we should make sure Stock we hold is not too much(max level) Stock we hold meets the needs of customers (min level) So how can we calculate maximum level of stock we hold in company And minimum level of stock we hold in company as well? Maximum level= old stock left + new stock in minimum usage during lead time = re-order level +quantities order-minimum usage Minimum Level= old stock left average usage during lead time =re-order level average usage during lead time 16

17 Q:Walgart Ltd Walgart Ltd specializes in selling cola and it has to source sugar from suppliers to manufacture Cola. According to its specific industry experience, we are given the following data: Lead time Minimum lead time 4 days Maximum lead time 7 days Usage Minimum usage 300kg per day Maximum usage 500kg per day Average lead time 5 days The order quantity from supplier is 5,400kg. Required:Calculate : (i)re-order level, (ii)minimum stock level (iii)maximum stock level 17

18 Q: KKT ltd (Free stock) Stock within warehouse is 500 units. KKT ltd orders 2,500 units from suppliers each time. The stock which is going to be sold to customers is 300 units. Required: calculate free stock. 18

19 Stock(inventory) valuation Cost FIFO: What comes in first then goes out first; Used for perish goods such as meat Weighted Average Cost: used when inventory movement is unknown and price is not consistent. Think about petrol. -periodic: cost of receipt + value of op inventory Noof units received + units in op stock It s to find the weighted average cost at the end of the period -continuous:calculate a new average after each receipt. Re-estimate the weighted average cost after the new receipt/new purchase made. 19

20 LIFO: what comes in last then goes out first. Think about technology companies. In USA, this is allowed. Example: (Jason) Jason has given you the following data: Required: Quantity Unit Cost Total Cost Opening Balance1/12/ units $2.00 $600 Receipts7/12/ units $2.20 $440 Issues8/12/ units Calculate the issue cost for inventory and the closing inventory value for Jason using the following methods: (i)fifo (ii)lifo (iii)weighted average method -continuous method; -periodic method. 20

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