SYED BASIT HUSSAIN

Ph: 0345-6877081

Cost Accounting
Inventory Management
Economic Order Quantity (EOQ)
EOQ= 2 x AR x O.C
C.C
EOQ = Economic order quantity
AR = Annual Requirement
O.C = Ordering Cost
C.C = Per unit Carrying Cost (storing cost)
i)
ii)
iii)
iv)
v)
vi)

i)

ii)
iii)

No. of orders = AR /Eoq

No. of days after an order placed = no. of days in an year
No. orders
Total ordering Cost =no. of orders x per order cost
Units in average
=
EOQ/ 2
Inventory
Total Carrying Cost =units in ave. inventory x per unit carrying cost
Total Cost
=total ordering cost + total carrying cost

Order Point/Level= maximum use during lead time x max. lead time
Or
Average daily use x lead time + safety stock
Or
Average use during lead time + safety stock
Minimum level= order point - (Ave. daily use x ave. lead time)
Maximum level=

order point (minimum daily use x minimum lead time)

+ Eoq

iv)

Danger level

Ave. daily use x Daily requirement to get

emergency stock

Factory Overhead Variances

Total/Overall Variance= Applied FOH Actual FOH
Total variance includes a) Capacity variance b) Budget Varianc
a) Capacity/ideal capacity/volume Varianc= Applied Foh Budgeted foh for actual

Applied Foh
Applied/Absorption/
Overhead rate
Budgeted foh for actual
capacity attained
Variable Rate

capacity attained
= Applied Rate x Actual Capacity
= Estimated Foh
Estimated/Normal capacity
=Fixed foh + variable rate x Actual Capacity

=Estimated variable foh

Estimated/Normal Capacity
b) Budget/spending/price/ =Budgeted foh for actual capacity attained actual foh
Expenditure Variance

EXTRA:.
Applied Rate
Fixed foh rate
Normal Capacity/
Budget volume

= fixed foh rate + variable foh rat

=Fixed Foh
Normal Capacity
=Fixed foh
Fixed foh rate

Or

=Estimated variable foh

Variable Rate

Fixed Foh Rate

=Applied Rate variable Foh rate

Syed Basit Hussain

0345-6877081