Management and Cost Accounting,
12th Edition by Colin Drury
Complete Chapter Solutions Manual
are included (Ch 1 to 26)
** Immediate Download
** Swift Response
** All Chapters included
** Discussion questions
** Employability skills
** Essay Questions
** Group Projects
** Teaching Notes
,Table of Contents are given below
1. Introduction to MA
2. An introduction to cost terms and concepts
3. Cost assignment
4. Process costing
5. Joint and by-product costing
6. Income effects of alternative cost accumulation systems
7. Cost-volume-profit analysis
8. Measuring relevant costs and revenues for decision-making
9. Pricing decisions and profitability analysis
10. Activity-based costing
11. Decision-making under conditions of risk and uncertainty
12. Capital investment decisions: appraisal methods
13. Capital investment decisions: the impact of capital rationing, taxation, inflation
and risk
14. Management control systems
15. The budgeting process
16. Standard costing and variance analysis 1
17. Standard costing and variance analysis 2: further aspects
18. Divisional financial performance
19. Transfer pricing in divisionalized companies
20. Strategic performance management
21. Strategic cost management and value creation
22. Management accounting – current technologies and data analytics
23. Sustainability and environmental management accounting
24. Overview and challenges for the future
25. Cost estimation and cost behaviour
26. Quantitative models for the planning and control of inventories
,Solutions Manual organized in reverse order, with the last chapter displayed first, to ensure that all chapters are
included in this document. (Complete Chapters included Ch26-1)
Quantitative models for the
planning and control of inventories
Solutions to Chapter 26 questions
EOQ = 2DO / H Solution IM 26.1
Demand (D) = 90,800 units
Ordering cost (O) = £5,910/30 × 1.02 = £200.94 per order
Holding cost (H) = £20 per unit × 15% = £3 per unit
2 × 200.94 × 90,800
EOQ = � = 3,448 units (349 boxes)
3
9,080 𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑑𝑑𝑏𝑏𝑑𝑑𝑎𝑎𝑎𝑎𝑑𝑑
Orders per year = = 26 orders
349 𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏 𝑝𝑝𝑏𝑏𝑝𝑝 𝑏𝑏𝑝𝑝𝑑𝑑𝑏𝑏𝑝𝑝
Order frequency = Every 2 weeks (52 weeks/26 orders per year)
(i)
2DO
EOQ = Solution IM 26.2
H
where D = total demand for period = 12,500 (3,125 × 4)
O = ordering cost per batch = £5
H = holding cost per unit in stock for one year = £0.5
Therefore
(2×12,500×5)
𝐸𝐸𝐸𝐸𝐸𝐸 = �� � = 500
0.5
Annual ordering cost = Number of orders × £5
12,500
= × £5
500
= £125
Annual cost of holding stock = average stock × £0.50
500
= × £0.50
2
= £125
Therefore minimum annual cost = £250 (£125 + £125)
(ii) Quarterly sales of 781 units
Total demand for period = 3,124 (781 × 4)
Therefore
2×3,124×5
𝐸𝐸𝐸𝐸𝐸𝐸 = �� 0.5
� = 250
1
, Quarterly sales of 6,250 units
Total demand for period = 25,000 (6,250 × 4)
Therefore
2 × 25,000 × 5
𝐸𝐸𝐸𝐸𝐸𝐸 = �� � = 707
0.5
The EOQ formula shows that the optimum batch size varies in proportion to the square
root of total demand (sales volume). Therefore when quarterly sales are 781 units, sales
volume changes by a factor of 14 compared with (i). Consequently the optimal batch size
changes by a factor of 1
2 ( 1
2
= 1
4 )
When quarterly sales are 6,250 units, sales volume increases by a factor of 2. Therefore
the optimal batch size increases by a factor of 2 = 1.414 approximately.
(iii) For an explanation of the economic batch size √(2DO/H) see ‘Determining the
economic order quantity’ in Chapter 26.
Solution IM 26.3 The cost of placing an order when the component is purchased is not given. This can be
obtained from the EOQ formula:
2DO
Q =
H
2DO
Q2 =
H
H Q = 2DO
2
HQ 2
O=
2D
0.25(2,000)2 2
0.25(2000)
=
=
2(20 000)
2(20.000)
= £25 (cost of placing an order).
1
Average stock level = Minimum stock level + 2
EOQ
1
= 400 + 2
(2,000) = 1,400 units
Comparison of annual costs
Make Buy
(£) (£)
Purchase cost 20,000 × £9 = £180,000
Storage 1,400 × £0.25 = 350
Ordering costs 10 × £25 = 250
Direct labour 20,000 × £6 = 120,000
Direct material 20,000 × £2 = 40,000
Leasing = 2,400
163,000 180,000
It is cheaper to make the component unless the released facilities have some alternative use.
If this opportunity cost is greater than £17,000 per annum then it will be cheaper to buy the
component. Note that direct labour is assumed to be a variable cost. The qualitative factors
arising from the direct labour force being made redundant should be considered if the
component is not made by the company.
2
12th Edition by Colin Drury
Complete Chapter Solutions Manual
are included (Ch 1 to 26)
** Immediate Download
** Swift Response
** All Chapters included
** Discussion questions
** Employability skills
** Essay Questions
** Group Projects
** Teaching Notes
,Table of Contents are given below
1. Introduction to MA
2. An introduction to cost terms and concepts
3. Cost assignment
4. Process costing
5. Joint and by-product costing
6. Income effects of alternative cost accumulation systems
7. Cost-volume-profit analysis
8. Measuring relevant costs and revenues for decision-making
9. Pricing decisions and profitability analysis
10. Activity-based costing
11. Decision-making under conditions of risk and uncertainty
12. Capital investment decisions: appraisal methods
13. Capital investment decisions: the impact of capital rationing, taxation, inflation
and risk
14. Management control systems
15. The budgeting process
16. Standard costing and variance analysis 1
17. Standard costing and variance analysis 2: further aspects
18. Divisional financial performance
19. Transfer pricing in divisionalized companies
20. Strategic performance management
21. Strategic cost management and value creation
22. Management accounting – current technologies and data analytics
23. Sustainability and environmental management accounting
24. Overview and challenges for the future
25. Cost estimation and cost behaviour
26. Quantitative models for the planning and control of inventories
,Solutions Manual organized in reverse order, with the last chapter displayed first, to ensure that all chapters are
included in this document. (Complete Chapters included Ch26-1)
Quantitative models for the
planning and control of inventories
Solutions to Chapter 26 questions
EOQ = 2DO / H Solution IM 26.1
Demand (D) = 90,800 units
Ordering cost (O) = £5,910/30 × 1.02 = £200.94 per order
Holding cost (H) = £20 per unit × 15% = £3 per unit
2 × 200.94 × 90,800
EOQ = � = 3,448 units (349 boxes)
3
9,080 𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑑𝑑𝑏𝑏𝑑𝑑𝑎𝑎𝑎𝑎𝑑𝑑
Orders per year = = 26 orders
349 𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏 𝑝𝑝𝑏𝑏𝑝𝑝 𝑏𝑏𝑝𝑝𝑑𝑑𝑏𝑏𝑝𝑝
Order frequency = Every 2 weeks (52 weeks/26 orders per year)
(i)
2DO
EOQ = Solution IM 26.2
H
where D = total demand for period = 12,500 (3,125 × 4)
O = ordering cost per batch = £5
H = holding cost per unit in stock for one year = £0.5
Therefore
(2×12,500×5)
𝐸𝐸𝐸𝐸𝐸𝐸 = �� � = 500
0.5
Annual ordering cost = Number of orders × £5
12,500
= × £5
500
= £125
Annual cost of holding stock = average stock × £0.50
500
= × £0.50
2
= £125
Therefore minimum annual cost = £250 (£125 + £125)
(ii) Quarterly sales of 781 units
Total demand for period = 3,124 (781 × 4)
Therefore
2×3,124×5
𝐸𝐸𝐸𝐸𝐸𝐸 = �� 0.5
� = 250
1
, Quarterly sales of 6,250 units
Total demand for period = 25,000 (6,250 × 4)
Therefore
2 × 25,000 × 5
𝐸𝐸𝐸𝐸𝐸𝐸 = �� � = 707
0.5
The EOQ formula shows that the optimum batch size varies in proportion to the square
root of total demand (sales volume). Therefore when quarterly sales are 781 units, sales
volume changes by a factor of 14 compared with (i). Consequently the optimal batch size
changes by a factor of 1
2 ( 1
2
= 1
4 )
When quarterly sales are 6,250 units, sales volume increases by a factor of 2. Therefore
the optimal batch size increases by a factor of 2 = 1.414 approximately.
(iii) For an explanation of the economic batch size √(2DO/H) see ‘Determining the
economic order quantity’ in Chapter 26.
Solution IM 26.3 The cost of placing an order when the component is purchased is not given. This can be
obtained from the EOQ formula:
2DO
Q =
H
2DO
Q2 =
H
H Q = 2DO
2
HQ 2
O=
2D
0.25(2,000)2 2
0.25(2000)
=
=
2(20 000)
2(20.000)
= £25 (cost of placing an order).
1
Average stock level = Minimum stock level + 2
EOQ
1
= 400 + 2
(2,000) = 1,400 units
Comparison of annual costs
Make Buy
(£) (£)
Purchase cost 20,000 × £9 = £180,000
Storage 1,400 × £0.25 = 350
Ordering costs 10 × £25 = 250
Direct labour 20,000 × £6 = 120,000
Direct material 20,000 × £2 = 40,000
Leasing = 2,400
163,000 180,000
It is cheaper to make the component unless the released facilities have some alternative use.
If this opportunity cost is greater than £17,000 per annum then it will be cheaper to buy the
component. Note that direct labour is assumed to be a variable cost. The qualitative factors
arising from the direct labour force being made redundant should be considered if the
component is not made by the company.
2
