Sarika has to show the profit details of the company where she works to
the CEO. Which Access object should she use for printing the profit
details? Write the steps to create the profit details report.
Answers
Answer:
The quantity to be ordered at one time is known as ‘ordering quantity’ and should be determined with good care. If it is small, a number of orders will have to be placed in a year involving costs in terms of clerical labour, material handling, etc. Also there will be loss in terms of price and transport costs. Large orders avoid these losses and will lead to economy in transport costs and price concessions.
But there will be costs in terms of interest payments for the money locked up and in terms of storing costs. An order should be large enough to enable the firm to earn proper discounts and to take advantage of bulk transport but it should not be too large to involve too heavy payment of interest. If the price to be paid is stable, the optimum quantity to be ordered or economic order quantity (EOQ) can be determined by the formula.
Formula for EOQ
where A – Consumption of the article concerned (in units) during a year;
O = Cost of placing one order including the cost of receiving the goods or ordering cost; and
C = Interest payment per unit per year including other variable cost of storing it (carrying cost per unit per annum)
Suppose a unit of article A cost Rs. 25 and the annual consumption is 2,000 units; the cost of placing an order is Rs.16 and the interest is 10 per cent p.a.
ADVERTISEMENTS:
The optimum quantity to order is:
Optimum Quantity of order
Since ordering cost varies inversely as EOQ and inventory carrying cost various directly as EOQ, the total annual cost will be minimum when above two are equal.
Total Annual Cost
There is another method of calculating EOQ i.e. Tabulation Method. This method is normally used when by increase in the quantity of purchases, there is change in the price also. In this method carrying cost is calculated on average i.e. 1/2 of quantity purchased. The least of ordering cost and carrying cost taken together will be the EOQ.
ADVERTISEMENTS:
Thus, factors influencing the size of EOQ or standard ordering quantity depend upon the following factors:
(i) Purchase price per unit for different ordering quantities.
(ii) Cost of purchasing per unit for different ordering quantities.
ADVERTISEMENTS:
(iii) The size of average inventory in respect of various ordering quantities. This size is again influenced by the Minimum stock level already established (The maximum delivery period and maximum consumption rate decide the reordering level).
(iv) Inventory storage charges per unit. The storage charges include rent of space, lighting etc of the store.
(v) Inventory carrying charges for different ordering quantities. These include insurance, taxes, depreciation, manual or clerical labour, interest on capital locked up in inventory, risk of spoilage, fall of market price of inventory, obsolescence etc.
It is to be noted that EOQ can be easily calculated when above factors remain stable and not varying. These may be taken as assumptions in the calculation of EOQ.
ADVERTISEMENTS:
Illustration 1:
X Ltd. bought and consumed during the year 2005, 3,600 units of material Y.