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06IM61-FINANCIAL ACCOUNTING & COSTING
FINANCIAL ACCOUNTING & COSTING
Sub Code:06IM61 IA Marks: 25
Hrs / Week: 4 Hrs Exam: 3 Hrs
Total Hrs: 52 Marks: 100
PART - A
UNIT - 1
FINANCIAL ACCOUNTING: Introduction to Book keeping: double-entry accounting, journal &
ledger posting. 6 Hours
UNIT - 2
FINANCIAL STATEMENTS & ANALYSIS: Trial balance, preparation of Trading and Profit &
Loss account, and Balance sheet. 8 Hours
UNIT - 3
RATIO ANALYSIS: Balance sheet ratio’s, profit – loss account ratio’s, and combined ratio’s.
6 Hours
UNIT - 4
COSTING: Objectives of costing, Elements of costing, methods of costing preparation of cost
sheet (job costing) 6 Hours
PART - B
UNIT - 5
Process costing, Marginal costing and absorption costing. 7 Hours
UNIT - 6
STANDARD COSTING: Material, labour, overhead cost variance.
ACTIVITY BASED COSTING: Target Costing, Activity Based Costing and management
7 Hours
UNIT - 7
WORKING CAPITAL MANAGEMENT: Factors influencing working capital requirement,
determination of operating cycle and working capital. 6 Hours
UNIT - 8
BUDGETING: Sales budget, production budget, raw materials purchasing budget, selling and
administrative expense budget, cash budget, Flexible Budget, Master budget. 6 Hours
TEXT BOOKS:
1. Cost Accounting - Khan M Y and Jain P K, Tata McGraw-Hill, 4th Edition.
2. Financial Management - Prasanna Chandra;; Tata McGraw-Hill, 4th Edition. 1998.
3. Management Accounting & Costing - PRASAD .N.K
4. Financial Management and Policy - James. C Vanhorne , Peerason education, 12th
edition.
REFERENCE BOOKS:
1. Elements of Accountancy - B.S Raman,
2. Practical Costing - Ahuja, Pandey, Khanna and Arora, , S. Chand & Co. Ltd 2005
3. Financial Management & Costing - KHAN & JAIN, TMH - 2000
LESSON PLAN
Sub Code: 06IM61 I.A. Marks: 25
Hours / Week: 04 Total Hours: 52
Subject: Financial Accounting & Costing Sem:VI
Hour. No Topics to be covered
Unit-1 Financial Accounting & Costing
1 Introduction
2 Objectives of book keeping
3 Systems of Book keeping
4 Double entry accounting
5 problems
6 Journal & ledger postings
7 Revision
Unit-2 Financial Statements and Analysis
8 Introduction
9 Balance sheet: Basic concepts
10 Contents of Balance sheet
11 Trial Balance Income Statement
12 Preparation of Balance sheet
13 Revision
Unit-3 Ratio Analysis
14 Preparation of financial statements
15 Analysis of financial statement
16 P&L Account ratios
17 Analysis of other ratios viz
18 Liquidity ratio
19 Turnover of P & L statement
20 Revision
Unit-4 Costing
21 Introduction
22 Objectives of costing
23 Elements of costing
24 Methods of costing
25 Preparation of cost sheet
26 Revision
Unit-5 Part B
27 Introduction
28 Methods of costing preparation
29 Process costing
30 Marginal costing
31 variable costing
32 Absorption costing
33 Revision
Unit-6
34 Principal of standard costing
35 Preparation of standard costing
36 Activity base costing-principles
37 Target costing
38 Preparation of Activity based costing
39 Activity based management
40 Revision
Unit-8 Budgeting
41 Budgeting its role in business
42 Master Budget
43 Elements of Budget
44 Solar Budget Production budget, etc
45 Revision
46 Unit-7 Working capital management
47 Introduction
48 Importance of working capital management
49 Factors influencing working capital requirements
50 Operating cycle Analysis
51 Fore casting working capital needs
52 Working capital control
HOD IEM
06IM62 – ENGINEERING ECONOMY
ENGINEERING ECONOMY
Sub Code:06IM62 IA Marks: 25
Hrs / Week: 04 Hrs Exam: 3 Hrs
Total Hrs: 52 Marks: 100
UNIT - 1
Introduction: Engineering Decision-Makers, Engineering and Economics, Problem solving and
decision making, Intuition and analysis, Tactics and Strategy.
UNIT - 2 Interest & Interest Factors: Interest rate, Simple interest, Compound interest, Cash flow diagrams,
Exercises and discussion
UNIT - 3
Present Worth Computations: Conditions for present worth comparisons, basic present worth
comparisons, Present worth equivalence, Net present worth, Assets with unequal lives, infinite
lives, future worth comparison, pay back comparison, exercises, Discussions and problems.
UNIT - 4
Equivalent Annual Worth Comparisons: Equivalent annual worth comparison methods,
situations for equivalent annual worth comparisons, consideration of asset life, comparison of assets
with equal and unequal lives, use of shrinking fund method, annuity contract for guaranteed income,
exercises and problems.
UNIT - 5
Rate of Return Calculations: rate of return, Minimum acceptable rate of return, IRR, IRR
misconceptions, cost of capital concepts, replacement models
UNIT - 6
Depreciation: causes of depreciation, basic methods of computing depreciation charges
Structural analysis of alternatives: Identifying and defining alternatives, IRR analysis of mutually
exclusive alternatives, Capital budget viewpoint, ranking criteria.
UNIT - 7 Replacement Analysis: Deterioration, Obsolescence, Inadequacy, Economic life for cycle
replacements.
Estimating & Costing: Components of costs such as Direct Material cost, Direct labor costs, Fixed,
overhead costs, Factory costs, Administrative over heads, First cost, marginal cost, selling price,
estimation for simple components.
UNIT - 8 Effects of Inflation: Causes, consequences and control of inflation, After tax actual cash flow
comparisons, Lease/Buy decisions
Text Books:
1. Riggs.J.L., Engineering economy, MC Graw Hill, 2002.
2. Thuesen H.G., engineering economy, PHI, 2002
Reference Books:
1. Tarachand, Engineering Economy.
2. O.P. Khanna, Industrial Engineering & Management, Dhanpat Rai & Sons.
3. I.M. Pandey, Financial Management, Vikas Pulishing House.
4. Paul Deoarmo, Engineering Economy, Macmillan Pub, Co.,
LESSON PLAN
Sub Code: 06IM62 I.A. Marks: 25
Hours / Week: 04 Total Hours: 52
Subject: Engineering Economy Sem:VI
Hour. No Topics to be covered
Introduction
01 Introduction
02 Engineering and Economics
03 Problem solving and decision making process
04 Intuition and Analysis
05 Tactics and Strategy
Interest & Interest Factors
06 Interest and Simple Interest- Ordinary and exact interst rates,problems
07 Compound Interest- Nominal and Effective interest rates & problems
08 Discrete compounding and Continuous Compounding
09 Cash flow diagrams from lender’s and borrowers point of view
10 Compound Interest Factors
11 Problems on compound Interest Factors
Present Worth Comparisons
12 Introduction, Conditions for present worth comparison
13 Present worth Equivalence, Net Present Worth
14 Present Worth Comparison Method & problem
15 Present worth comparison of Assts with Unequal lives &infinite lives
16 Future worth Comparison
17 Pay back Comparison
Equivalent Annual Worth Comparisons
18 Introduction, Conditions for Equivalent Comparison method
19 Situation for Equivalent Comparison method & problems
20 Annual worth comparison of Assts with equal lives & unequal lives
21 Use of shrinking fund method
22 Annuity contract for guaranteed income.
23 Exercises on ranking the alternatives.
Rate of Return Calculations 24 Introduction, Rates of Return, MARR
25 Internal Rate of Return-Concept
26 Clues for IRR Calculations
27 Simple Investment- Problems
28 Problems on Ranking Criteria
29 Non-Simple Investment, Problems
30 Explicit Investment Rate, HERR Method
31 Project Balance Method, Cost of capital concept
Depreciation & Structural analysis of alternatives
32 Introduction, Causes of Depreciation
33 Basic methods of Computing depreciation charges- Straight Line Method,
Diminishing Balance Method
34 Sinking Fund Method, SOYD Method, Units of Production Method
35 Problems on various Methods
36 Identifying and defining alternatives
37 IRR analysis of mutually exclusive alternatives
38 Capital budget viewpoint, ranking criteria
Replacement Analysis
39 Introduction, Deterioration, Obsolescence, Inadequacy
40 Replacement of assets whose maintainance cost increases with time and value of
money remains constant & increases with time and value of
money changes with time
41 Group Replacement policy
Estimating & Costing
42 Components of cost & problems
43 Cost Estimation for simple components- Steps
Effects of Inflation
44 Introduction, Causes of Inflation,
45 Consequences of Inflation
46 Control of Inflation
47 After Tax actual cash flow comparison
48 Lease/Buy Decision
Break Even Analysis
49 Introduction, Terminology
50 Various regions in Break Even Chart
51 Problems on Linear Break Even Chart
52 Non Linear Break Even Analysis
HOD-IEM
QUESTION BANK
01 What is decision making? Briefly explain the importance of decision-making in
Engineering Economics.
02 Enumerate the difference between strategy and tactic giving suitable examples.
03 Discuss the interest from borrower’s and lenders point of view.
04 Explain in brief about Simple Interest and Compound Interest.
05 Explain nominal and effective interest rates.
06 Derive the equation for calculating the future worth of series of discrete payments when
the interest rate is compounded continuously.
07 What are the conditions for present worth comparison?
08 Compare the asset with equal and unequal lives.
09 Explain ranking Criteria by IRR method
10 What do you mean by Rate of Return? How it is determined for a Hypothetical cash flow.
11 Give example of assets whose economic evaluation is to be considered on the basis of
infinite lives.
12 Explain MARR. How it is useful in ranking the alternative using Annual Worth.
13 Explain net Annual worth of a single product with Example.
14 Define the term ‘depreciation’. What are the causes of depreciation? Explain.
15 Explain the various elements, which go to make up the total cost of any Product.
16 Explain sum of the year digits method of depreciation.
17 What are the two basic financial statements? Explain their importance to the various
users.
18 What is current asset? How does it differ from fixed asset?
19 Differentiate between
� Trial Balance and Balance Sheet
� Profit & Loss Account and Balance Sheet
� Capital Expenditure and Revenue Expenditure
20 Explain the need for the financial analysis. How does the use of ratios help in financial
analysis?
21 What is firm’s earning power? How are the net profit margin and the asset turnover
related?
22 Outline the role of ratio analysis in financial decision-making.
23 Define budget. Briefly explain the purposes served by budgeting.
24 What are the essentials of a sound system of budgeting? Explain.
25 What is financial Planning? How does it differ from financial forecasting?
Problems
1. Machine A costs Rs.12000, no salvage value at the end of 10 years of useful life and annual
expenses of Rs.2200. The machine B costs Rs.40000 now and has an expected salvage value of
Rs.10000 at the end of 25 years. Annual expenses of the machine B are Rs.1000. Compare the
two alternatives on the basis of present worth using repeated project assumption at 15 % annual
interest. Use CFD for your analysis.
2. Machine A has a first cost of Rs.9000 and no salvage value at the end of 6 years of useful life
and operating cost of Rs.5000. The machine B costs Rs.16000 now and has an expected salvage
value of Rs.4000 at the end of 6 years. Annual expenses of the machine B are Rs.4000.
Compare the two alternatives on the basis of present worth at 10 % annual interest. Use CFD for
your analysis.
3. An electric utility company is looking at two alternatives for tree-trimming equipment. One is to
subcontract to an independent maintenance company. The subcontractor’s bid calls for Rs.98,
000 the first year with additional costs of Rs.8000 per year for subsequent years. The utility
company is considering buying equipment with a first cost of Rs.2, 20,000 and annual operating
cost of Rs 65,000/year. The equipment is expected to have a salvage value of Rs 25,000 at the
end of its useful life of 5 years. Using internal rate 12 %, evaluate the alternatives on EAC basis.
4. A frozen fish company is planning an expansion to a cold storage facility. Four alternative site-
design proposals are being considered at an interest rate of 15 %. Plan A and Plan B requires an
expenditure of Rs.3,50,000, while Plan C and D requires Rs.4,25,000 for land. These real estate
investments are assumed to be permanent. The buildings are expected to last 30 years, the
compressors and related equipment will last 10 years before required replacement, and energy
costs will increase throughout the building life. Neither the buildings nor the equipment is
expected to have any salvage value. With this information and the data provided, make an
annual cost comparison to determine which proposal is preferred.
Proposal A Proposal B Proposal C Proposal D
Building & Installation, Rs. 6,00,000 7,00,000 4,00,000 5,00,000
Compressors, Rs. 1,00,000 1,35,000 85,000 70,000
Expected Energy cost:
First year: Rs. 65,000 48,000 65,000 54,000
Increase for each additional
year, Rs. 3000 2000 3500 2000
Annual Maintenance costs 20,000 15,000 50,000 40,000
5. A grocery chain of four stores is evaluating whether to install video screens on all its grocery
carts. These screens will display pricing and ‘specials’ as the cart goes by the pertinent items.
Cart location is sensed by Ceiling sensors that trigger the appropriate information for the
particular screen. The first cost of the equipment is Rs.65, 000 per store. Annual programming
and screen information would be subcontracted at a total cost of Rs.25,000 per year for four
stores. Because of the novelty, sales are expected to increase by Rs28, 000 per stores in the first
year and then drop at a rate of Rs4500 per stores per year for each subsequent year. The
technological life of the system is 5 years. If a 12 % return on investment is required, determine
the minimum salvage value of the equipment that would be needed after 5-year period, by
equivalent annual net worth of the project.
6. Evaluate the following plans, using the incremental IRR approach, and select the preferable
alternative. The MARR is 6 %.
Plan 1 Plan 2 Plan 3
First Cost, Rs. 70,000 59,000 1,00,000
Salvage Value, Rs. 6000 4000 7500
Economic Life, Years 8 8 8
Annual Receipts, Rs. 32,000 30,000 51,000
Annual Payments, Rs. 18,000 23,000 35,000
7. A Seafood Company is planning an expansion to a cold storage facility. Three alternative site-
design proposals are being considered that use a MARR of 10 %. Plan A and Plan B requires an
expenditure of Rs.3, 50,000 for a land which will retains its value in 10 years, while Plan C
requires Rs.4, 25,000 for land which will also retains its value in 10 years. The estimated
income increase due to facility available is annualized at Rs.2, 48,000/year. The company
required that a life of 10 years be use for the analysis. Data, associated with the projects are as
follows:
Proposal A Proposal B Proposal C
Building & Installation, Rs. 6,00,000 7,00,000 4,00,000
Compressors, Rs. 1,00,000 1,35,000 85,000
Expected Energy cost:
First year: Rs. 65,000 48,000 65,000
Increase for each additional year, Rs. 3000 2000 3500
Annual Maintenance costs 20,000 15,000 50,000
Estimated Salvage Value 35,000 43,000 18,000
Evaluate the alternatives using IRR criterion.
8. A printing Machine Costing Rs 4.8 Lakhs has a life of 8 years with a salvage value of Rs
80000/-. Determine the following: -
� Depreciation charge using the Straight-line method and also the double Declining
balance Method.
� Book value of the machine at the end of each year using both methods.
� Plot the graph of time versus book value for both methods.
9. An asset has a first cost of Rs45000/-with an estimated life of 10 years. The salvage value at the
time is estimated to be Rs 5000.What is the total accumulated depreciation charged during the
first 4 years of the asset’s life for SOYD depreciation and Sinking fund depreciation for the an
interest rate of 12 %.
10. An asset cost Rs.400 when purchased before 4 years. Expected salvage value after 7 years life is
Rs 50.Determine the asset depreciation charge after the current year and its present book value
by
� 1.Stright line method
� 2.Declining balance method.
� 3.Sinking fund method.
11. The catalogue price of a certain machine is Rs 1050/-the discount allowed to the distributors
being 20%. Data collected at a certain period show that the selling cost and the factory cost are
equal and the relation between material cost, labour cost and on cost in the factory are 1:3:2.If
the labour cost is Rs 200/- what profit is made on the machine?
12. The following data relates to a manufacturing firm, ABC Ltd:
ABC Ltd Manufacturing Costs: (Rs. in lakhs)
Raw material purchased 30450
Wages 6500
Power and fuel 675
Repairs 385
Maintenance 250
Consumables 320
Depreciation 1500
Factory rent 20
Stock of Raw material: Opening: 3900
Closing: 3750
Work-in-process: Opening: 10950
Closing: 10700
Finished goods: Opening: 8000
Closing: 8300
13. Arrange the following items of profit and loss account of a firm
Items Of Profit& Loss Account (Rs. in lakhs)
Excess provision of tax in previous year 150.00
Other income 520.50
Depreciation 1200.00
Interest 2675.40
Cost of sales 60750.60
Proposed dividend 680.00
Provision for tax 500.00
Operating and Administration Expenses 10460.70
Sales 76300.00
14. X Co., has made plans for the next year. It is estimated that the company will employ total
assets of Rs.8, 00,000: 50 percent of the assets being financed by borrowed capital at an interest
cost of 8 percent per year. The direct costs for the year are estimated at Rs.4,80,000 and all other
operating expenses are estimated at Rs.80,000. The goods will be sold to the customers at 150
percent of the direct costs. Tax rate is assumed to be 50 percent. You are requires to calculate a)
Net profit margin b). Return on assets c) Asset turnover and d) return on owner’s equity.
15. The summarized Balance Sheet of XYZ Ltd for the year 31st Dec’01 and 31st Dec’02 and PLA
are given below
Asset 2001 2002 Liability 2001 2002
Fixed Asset 5,50,000 4,40,000 Equity Share Capital 5,00,000 5,00,000
Current Asset 5,70,000 4,70,000 General Reserves 1,95,000 1,60,000
Current Liabilities 4,25,000 2,50,000
11,20,000 9,10,000 11,20,000 9,10,000
2001 2002
Sales (all credit) 15,00,000 12,00,000
Cost of sales 10,80,000 9,00,000
Gross profit 4,20,000 3,00,000
Overhead expenses 2,90,000 2,00,000
Net Profit 1,30,000 1,00,000
Calculate relevant ratios to evaluate the company’s comparative financial positions.
16. Assume that a firm has owners’ equity of Rs.1, 00,000. The ratios for the firm are:
Current debt to total debt 0.40
Total debt to owners equity 0.60
Fixed asset to owners equity 0.60
Total asset turnover 2 times
Inventory turnover 8 times
Complete the balance sheet with the given information
Liabilities Rs Assets Rs.
Current debt ------ Cash ------
Long-term debt ------ Inventory ------
Total debts ------ Total Current Asset ------
Owners equity ------ Fixed assets ------
Total Capital ------ Total asset ------
17. Prepare a purchase budget from the following particulars, where the estimated price per kg of
material is: X Rs.2, Y Rs.3 and Z Rs.4 respectively
Materials Estimated Stock (in Kg)
Consumption (in Kg) On 1.1.2003 On 1.12.2003
X 1,00,000 30,000 15,000
Y 2,00,000 40,000 20,000
Z 2,50,000 45,000 50,000
06IM63 – MATERIALS MANAGEMENT
MATERIALS MANAGEMENT
Sub Code:06IM63 IA Marks: 25
Hrs / Week:04 Hrs Exam: 3 Hrs
Total Hrs: 52 Marks: 100
Introduction: Dynamics of materials management, Materials management at micro level and
Materials management at macro level. Inventories of materials, Total concept, definition. A brief
history of development. An overview systems approach to materials management. The process of
management and the materials function, the materials function, and planning for materials A brief
history of development, an overview, A systems approach to materials management. The process of
management and the materials functions, interfaces, an overview of systems concept, benefits of
integrated materials management systems approach. 06hrs
Forecasting, objectives and the materials organization: systems, design, integral control of flow
of materials, Forecasting and planning, forecasting methods, objectives of materials management,
environmental change, the development of functional organization. A question of structuring,
leadership style. 06hrs
Materials Planning: Making materials plan work. The materials cycle and flow control system,
materials budget. 02hrs
Purchasing: purchasing principles procedures and practices, fundamental objectives of purchasing,
scope, and responsibility and limitations of purchasing. Sources of supply and Supplier selection.
Purchasing policy and procedures. Purchase budget and statistics. 04hrs
Purchase In Materials Management: system concept of, price determination, price forecasting,
price-cost analysis. The learning curve. Negotiation, reciprocity, cost-plus contracts, hedging,
forward buying, buying ethics, principles and standards of purchasing, Make or buy information,
documentation and purchasing library, legal aspects of purchasing., documentations and purchasing
library. Law of agency, Law of contract, legal status of buyer, warranties and conditions, right of
inspection, right of rejection, vendor-vendee relations, vendor development. 08hrs
Purchasing Of Capital Equipment, Plant & Machinery: Responsibility and decision, purchasing
Vs leasing. 01hr
International Buying & Import Purchasing: Industrial needs, import procedure and documents,
classification of stores, categories of importers, import applications, basis of licensing, import
purchasing procedures, letter of credit, income tax clearance, customs tariff, Registration of licenses
at post. 04hrs
Inventory Management & Control Systems: definition of inventory, the need for inventory and
its important, functions of inventory management, types of inventory control, cost elements,
economic order quantity, standard deterministic EOQ models, Max-Min system, Inventory and
demand uncertainty. Determining safety stock Q-system, effect of quantity discounts, P-system,
optional replenishment system Demand forecasting, uncertainty and risk, stores keeping and
inventory control, A practical approach, ABC inventory classification. The need for systems
approach, Material requirement planning. The basic tools, conclusion.
14hrs
Stores Management & Operation: Storage system, Stores location and layout, development of
storing, centralization and decentralization of stores. Standardization and variety reduction, the
systems, merits and demerits of codification, materials accounting and materials audit. 04hrs
Materials Management Information System & Computer: Mis-Management and MM, computer
system for MIS and MM. In-process materials management control. 03hrs
Text Books:
1. Datta A.K Material Management, procedures text and cases
2. Gopal Krishna and Sundaresan, Material Management An integrated Approach /PHI New
Delhi 1997
Sub Code: 06IM63 I.A. Marks: 25
Hours / Week: 05 Total Hours:52
Subject: Materials Management Sem:VI
Hour. No Topics to be covered
01 Introductory class on materials management, its significance's explained
02
03
Definition and scope, organization for materials management
Integrated materials management explained
04
05
Micro and macro factors in materials management and
planning for materials.
06 Assignment on introductory chapter given.
07 Introduction, functions, objectives and scope of purchasing
08
09
Organization, procedures, preparations of terms
records for purchasing with examples
10
11
Methods of purchasing, local purchases,
restricted enquiry, open tender enquiry
12 Methods of purchasing: Open tender enquiry
13
14
Delegation of purchasing powers to hierarchy,
centralized and decentralized purchasing
15 Purchasing through DGSD rate contracts (Questions for assignment)
16 Purchase budget and statistics. Vender development,
selection of source of supply.
17 Supplier evaluation, rating of vendors, price, cost analysis
18 BIS standards for vendor evaluation (Questions for assignments)
19 Legal aspects of purchasing
20 Law of agency, contract, buyer warranty and right of inspection, rejection
21 Industrial needs, import procedure and documents
22 Classification of stores and categories of importers
23 Import applications, licensing methods
24 Import purchasing procedures
25 Credit letter, income tax clearance
26 Customs tariff, registration of licenses at post
27
28
Organization for stores location and layout. Functions of store
Keeping, receipt inspection.
29
30
Storage and issue of materials LIFO,
FIFO, average cost and other methods of accounting and issue
31 Two bin systems of inventory, control, control of damage
32 Control of damage, deterioration pilferage and obsolescence of goods
33
34
Classification and coding of materials,
ABC, FSN and VED analysis
35 Systems merits and demerits of codifications
36 Materials accounting and materials audit.
HOD-IEM
37
Worked out examples on ABC analysis. Using MS – Excel
38
39
Application of FSND and
VED analysis with examples
40
41
System view of co-ordination and management of transportation inventory,
order processing Inventory, order processing, purchasing
42
43
Need scope and importance of inventory.
Impact of profitability, modern concept of inventory
44 Lead time analysis and safety stock planning with respect to procurement policy
45 Inventory cost – ordering cost, shortage cost. Dynamic inventory models
46 Instantaneous and finite rate of replenishment with shortage
47 Instantaneous and finite rate of replenishment with shortage
48 Explanation of above models, its assumptions
49 Models with price breaks and quantity discounts Models with price breaks and
quantity discounts
50 Multi item deterministic models Restriction on floor space,
total, value and numbers of items Restriction on floor space,
total, value and numbers of items
51 How to work materials plans,
Material budget The materials cycle and flow of control system
52
Materials planning in JIT and ERP Of ERP package to explain what ERP is and
how it workss Of ERP package to explain what ERP is and how it workss
Configaration of ERP
QUESTION BANK
01 What is the scope and importance of materials management?
02 Define the materials management.
03 What is the need for integrated concept and also mention the advantages of integrated
materials management concept.
04 What are micro and macro factors in materials management and explain in detail.
05 What is a material research?
06 What is the importance and scope of purchasing in Materials Management?
07 What are the objectives/goals and functions of purchasing department in Materials
Management?
08 What are the various types of Purchase systems and explain various stages under each
system in detail.
09 What are the uses of Forecasting price and also mention and explain various price-
forecasting techniques.
10 What are the differences between purchasing capital equipment and purchasing of
consumption materials?
11 Explain the concept of material forecasting and planning
12 Explain the learning curve with respect to purchasing
13
14 Explain the preparations of forms and records for purchasing with examples.
15 What are the various methods of purchasing (open purchase, restricted enquiry, open
tender enquiry and) explain these importance and steps in each method.
16 What are differences between centralized and decentralized purchasing and their
advantages?
17 What is vendor development and what are various steps in source selection
18 What is supplier evaluation and mention various steps in selecting best supplier.
19 Mention and explain BIS standards for vendor evaluation.
20 What is stores management and mention the objectives and functions of stores
management.
21 What is stores Layout and Location
22 Mention and explain various stores systems and procedures.
23 What is the necessity of incoming material control and also mention and explain various
incoming material inspection and control.
24 Mention and explain various store accounting and stock verification procedures.
25 Explain in detail about Obsolete, Surplus and Scrap Management.
26 Define Codification, Standardization and Simplification and also mention advantages and
disadvantages under each.
27 What is ABC, FSND, and VED analysis and explain their importance in Materials
Management.
28 What are various mechanisms and Advantages of ABC analysis.
29 What are the need, scope and importance of keeping Inventory in any firm?
30 Explain clearly the various costs that are involved in inventory problems with suitable
examples. How they are inter-related?
31 What is an inventory system? Explain clearly the different costs that are involved in
inventory problems with suitable examples.
32 What are the basic ideas involved in EOQ concept? Discuss.
33 What is Economic Order Quantity? Discuss step by step the development of EOQ formula
by mentioning assumptions.
34 Derive an Economic lot size formula, Optimum inventory cost, Optimum ordering
interval and Optimum number of orders for the optimum production quantity q per cycle
so as to minimize the total average cost per unit time, where lead time is zero, demand is
uniform, production is instantaneous and there are no shortages.
35 An aircraft company uses rivets at an approximate customer rate of 2,500 kg per year.
Each unit costs Rs. 30 per Kg. And the company personnel estimate that it costs Rs. 130
to place an order, and that the carrying cost inventory is 10% per year. How frequently
should orders for rivets be placed? Also determine the optimum size of each order.
36 A manufacturing company purchases 9,000 parts of a machine for its annual requirements,
ordering one-month usage at a time. Each part costs Rs. 20. The ordering cost per order is Rs. 15,
and the carrying charges are 15% of the average inventory per year. You have been asked to
suggest a more economical purchasing policy for the company. What advice would you offer, and
how much would it save the company per year.
37 A contractor has to supply 10,000 bearings per day to an automobile manufacturer. He finds that,
when he starts a production run, he can produce 25,000 bearings per day. The cost of holding a
bearing in stock per one year is 20 paise, and set-up cost of a production run is Rs. 180.00. How
frequently should production run be made?
38 The demand of an item is uniform at a rate of 25 units per month. The fixed cost is Rs. 15 each
time a production is made. The production cost is Rs. 1 per item, and the inventory carrying cost
is Rs. 0.30 per item per month. If the shortage cost is Rs. 1.50 per item per month, determine how
often to make a production run and of what size it should be?
39 The demand for an item in a company is 18,000 units per year, and the company can produce the
item at a rate of 3,000 per month. The cost of one setup is Rs.500.00 and the holding cost of one
unit per month is 15 paise. The shortage cost of one unit is Rs 20.00 per year. Determine the
optimum manufacturing quantity and the number of shortages. Also, determine the manufacturing
time and the time between set-ups.
40 The demand for a certain item is 16 units per period. Unsatisfied demand causes a shortage cost of
Rs. 0.75 per unit per short period. The cost of initiating purchasing action is Rs. 1 per purchase
and the holding cost is 15% of average inventory valuation per period. Item cost is Rs. 8.00 per
unit. (Assume that shortages are being back ordered at the above-mentioned cost). Find the
minimum cost of purchase quantity
41 Consider a shop, which produces three items. The items are produced in lots. The demand rate for
each item is constant and can be assumed to be deterministic. No back orders are to be allowed.
The pertinent data for the items is given in the following table:
Item 1 2 3
Holding cost (Rs.) 20 20 20
Set-up cost (Rs.) 50 40 60
Cost per unit (Rs.) 6 7 5
Yearly demand rate 10,000 12,000 7,500
Determine approximately the Economic Order Quantities when the total value of average
inventory levels of three items is Rs. 1000
42 A company producing three items has a limited storage space of averagely 750 items of
all types. Determine the optimal production quantities for each item separately, when the
following information is given:
Product 1 2 3
Holding cost (Rs.) 0.05 0.02 0.04
Set-up Cost (Rs.) 50 40 60
Demand rate (per item) 100 120 75
43 Consider the inventory problem with three items (i.e., n=3). The parameters of the
problem are shown in the table below.
Item
(i)
Ri
(units)
C3 (i)
(Rs.)
C1 (i)
(Rs.)
ai
(mt2)
01 20 100 30 1
02 40 50 10 1
03 30 150 20 1
44 Define the terms ‘safety stock’ and ‘EOQ’ with the help of ideal inventory model.
45 Explain the problem of inventory control with deterministic demand.
46 A company uses annually 24000 units of a raw material, which costs Rs. 1.25 per unit.
Placing each order costs Rs. 22.5 and the carrying cost is 5.4 percent per year of the
average inventory. Find the economic order quantity, and the total inventory cost
(including the cost of material). Should the company accept the offer made by the supplier
of a discount of 5% on the cost price on a single order of 24,000 units? Suppose the
company works for 300 days a year. If the procurement time is 12 days and safety Stock
is 400 units; find the re-order point, the minimum, maximum and average inventory.
47 A company uses annually 50,000 units of an item each costing Rs. 1.20. Each order costs
Rs. 45 and inventory carrying costs 15% of the annual average inventory value.
� Find EOQ
� If the company operates 250 days a year, the procurement time is 10 days and safety
stock is 500 units, find the re-order level, maximum, minimum and average inventory.
48 For a periodic review system, find out the various parameters for an item with the
following data:
� Annual consumption = 14,000 units
� Cost of one unit = Rs. 10
� Supplier minimum quantity = 1,000 units
� Normal lead-time = 10 days
� Maximum lead-time = 15 days
� Maximum consumption = 1.20.
49 Formulate and solve a mathematical model for all units’ discounts when shortages are not
allowed to obtain the optimal value of the order quantity.
50 A purchase manager has decided to place order for a minimum quantity of 500 units of a
particular item in order to get a discount of 10%. From the records, it was found that in
the last year 8 orders each of size 200 units have been placed. It is given that ordering cost
= Rs. 500 per order, inventory carrying cost = 40% of the inventory value, and the cost
per unit = Rs. 400. Is the purchase manager justified in his decision? What is the effect of
his decision to the company?
51 What is ABC analysis? Why is it necessary? What are the basic steps in implementing it?
52 Explain the importance of ‘ABC’ analysis in the problem of inventory control of an
organization using a large number of items.
53 Explain the basis of selective inventory control and state the different selection techniques
adopted in inventory control system. Give a brief note on each.
54 Explain the following:1) Law of contract 2) Law of agency 3) legal status of buyer,
warranties and conditions.
55 How does materials plan work? Explain with a suitable example
56 Explain the import procedure
57 Explain import documents
58 Explain the concept of customs tariff with respect to import
59 Explain the role of Management information systems in an “Integrated Materials
Management Approach”
60 Explain in-process materials and management control
