Cost and Management AccountingQuestion 5440 of 251
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2. What will be the total annual cost of purchases as per the quantity calculated in Q-1 above?

Options

A` 3,84,80,000
B` 4,37,40,000
C` 4,29,30,000
D` 5,80,84,000
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Correct Answer

✅ Option A — ` 3,84,80,000

All Options:

  • A` 3,84,80,000 ✓
  • B` 4,37,40,000
  • C` 4,29,30,000
  • D` 5,80,84,000

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Detailed Solution & Explanation

The total annual cost of purchases includes the material purchase cost, the total ordering cost, and the total carrying cost at EOQ:
1. **Annual Purchase Cost:**
Purchase Cost=A×P=54,000 units×₹800/unit=₹4,32,00,000\text{Purchase Cost} = A \times P = 54,000 \text{ units} \times ₹800/\text{unit} = ₹4,32,00,000
2. **Annual Ordering Cost:**
Ordering Cost=AEOQ×O=54,0001,800×₹9,000=₹2,70,000\text{Ordering Cost} = \frac{A}{\text{EOQ}} \times O = \frac{54,000}{1,800} \times ₹9,000 = ₹2,70,000
3. **Annual Carrying Cost:**
Carrying Cost=12×EOQ×C=12×1,800×₹300=₹2,70,000\text{Carrying Cost} = \frac{1}{2} \times \text{EOQ} \times C = \frac{1}{2} \times 1,800 \times ₹300 = ₹2,70,000
Total Annual Cost=4,32,00,000+2,70,000+2,70,000=₹4,37,40,000\text{Total Annual Cost} = 4,32,00,000 + 2,70,000 + 2,70,000 = ₹4,37,40,000
Hence, **Option A** is the correct answer.

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