Question

PART 1.2 {10}

Hluhluwe Limited uses the economic order quantity formula (EOQ) to establish its optimal reorder

quantity for its single raw material. The following data relate to the inventory costs:

Purchase price: R15 per item

Ordering costs: R5 per order

Storage costs: 10% of the purchase price plus R0,20 per unit per annum

Annual demand: 3 825 units

REQUIRED:

1.2.1 Calculate the EOQ (3)

1.2.2 Using the EOQ calculate the number of orders that will be placed during the year (2)

1.2.3 Using the EOQ calculate the ordering and holding costs for the year (2)

1.2.4 What assumptions underlie the EOQ model? (3)

QUESTION 2 (20 marks)

TGF Limited has 61 employees of whom 52 work in production and 9 work in the service departments.

The normal hourly rates paid are R24,00 for direct wages and R19,50 for indirect wages. Overtime is

payable at 1,5 times the basic rate. The following additional information applies to the latest period:

Hours worked:

Normal direct………………………………………………… 25 520 hours

Normal indirect………………………………………………. 4 430 hours

Overtime direct………………………………………………. 2 120 hours

Overtime indirect…………………………………………….. 380 hours

Deductions were as follows:

Pension fund contribution…………………………………... 7,5% of the normal wage

Medical aid contribution - direct……………………… R14 529,12

- indirect……………..…….. R3 455,40

UIF……………………………………………………………. 1% of the gross wage

Tax (PAYE)………………………………………………….. 18% of taxable income

REQUIRED:

Calculate the following:

2.1 Total gross wages as per the payroll (before cost allocation) (5)

2.2 Taxable income of direct labour employees (3)

2.3 Net wages of indirect labour employees (6)

2.4 Total overtime premium (3)

2.5 Total amounts allocated to direct and indirect labour costs (3)

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Answer 1

Answer:

total Rose veg as per the viral before cost