Reference no: EM132577534

Question 1) Mr. Litali is undecided about the best inventory valuation system to adopt for his new company. Your lecturer has tasked your syndicate to advise him on the way forward.

Below is information relating to the month of June.

1. 01/06/2020 2,500 chipsets were acquired at the price of Kshs 3,500 per unit

2. 02/06/2020 500 chipsets were issued to the production department.

3. 04/06/2020 150 chipsets were returned from the production department.

4. 07/06/2020 750 chipsets were issued to the sales department.

5. 09/06/2020 1,500 chipsets were acquired at the price of Kshs 3,300 per unit

6. 13/06/2020 2,300 chipsets were issued to the production department.

7. 07/07/2020 200 chipsets were returned to the supplier.

8. 20/06/2020 1,800 chipsets were acquired at a cost of Kshs 3,700 per unit.

9. 22/06/2020 300 chipsets were found to be defective, the supplier did not accept them back.

10. 24/06/2020 700 chipsets were issued to the sales department

11. 23/06/2020 300 defective chipsets were sold at a scrap value of Kshs 2,000

12. 27/06/2020 1,100 chipsets were acquired at Kshs 4,000 per unit

The prevailing price of chipsets at the end of the month is Kshs 3,800

(Remember there are five different methods of inventory valuation)

Question 2) The warehousing and security costs have skyrocketed since the inception of the dry port at Naivasha. Mr. Litali is keen on keeping inventory costs low.

The monthly demand is estimated at 4,550 chipsets, while the ordering cost is pegged at Kshs 150,000. Litali is adamant about the new warehousing cost of Kshs 300 per unit.

Advise Mr. Litali on how many orders he should make in a year.

Mr. Litali in a recent phone call with his supplier was made aware of quantity discounts. He has no idea of how this will impact his inventory costs.

Educate him on the relevance. (Include the necessary computational formulae)