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CA Inter Corp Laws — Question Paper — May 2018

This page contains all 2 questions from the CA Inter Corporate & Other Laws Question Paper for the May 2018 attempt cycle, sourced from VSI Jaipur.

✅ 2 of 2 questions have AI-generated solutions with bare-Act citations.
Q1Economic Order Quantity (EOQ) — separate and combined purcha
0 marks easy
Arnav Ltd. manufactures a product X which requires two raw materials A and B in a ratio of 1:4. The sales department has estimated a demand of 5,00,000 units for the product for the year. To produce one unit of finished product, 4 units of material A is required. Stock position at the beginning of the year is as below: Product-X: 12,000 units Material A: 24,000 units Material B: 52,000 units To place an order the company has to spend ₹15,000. The company is financing its working capital using a bank cash credit @13% p.a. Product X is sold at ₹1,040 per unit. Material A and B is purchased at ₹150 and ₹200 respectively. Required: COMPUTE economic order quantity (EOQ):
💡 Show solution AI SOLUTION

Preliminary Calculations:

Annual production required = Sales demand − Opening stock of Product X = 5,00,000 − 12,000 = 4,88,000 units

Since A:B = 1:4 (by units) and 4 units of Material A are required per unit of Product X, Material B required per unit = 4 × 4 = 16 units.

Net annual purchases (after adjusting opening raw material stock):
- Material A: (4 × 4,88,000) − 24,000 = 19,52,000 − 24,000 = 19,28,000 units
- Material B: (16 × 4,88,000) − 52,000 = 78,08,000 − 52,000 = 77,56,000 units

Carrying cost per unit p.a.: C_A = 13% × ₹150 = ₹19.50; C_B = 13% × ₹200 = ₹26.00
Ordering cost (O) = ₹15,000 per order

(i) EOQ — Separate Purchase Orders [₹15,000 per material per order]

EOQ = √(2DO/C)

EOQ for A = √(2 × 19,28,000 × 15,000 / 19.50) = √2,96,61,53,846 ≈ 54,465 units

EOQ for B = √(2 × 77,56,000 × 15,000 / 26) = √8,94,92,30,769 ≈ 94,600 units

(ii) EOQ — Combined Purchase Orders [one ₹15,000 ordering cost covers both materials]

When ordered together, A and B must be ordered at the same frequency. The optimal number of combined orders per year:

n = √[(D_A × C_A + D_B × C_B) / (2 × O)]
= √[(3,75,96,000 + 20,16,56,000) / 30,000]
= √[23,92,52,000 / 30,000] = √7,975.07 ≈ 89.3 orders p.a.

EOQ for A (combined) = 19,28,000 ÷ 89.3 ≈ 21,590 units per order

EOQ for B (combined) = 77,56,000 ÷ 89.3 ≈ 86,853 units per order

Note: Under combined ordering, the company places fewer total orders (89.3 vs 35 + 82 = 117 separate orders), saving ordering costs; carrying costs adjust accordingly.

Q2Stock levels — re-order quantity, re-order level, maximum, m
0 marks easy
A company manufactures 5,00,000 units of a product per month. The cost of placing an order is ₹1,000. The purchase price of the raw material is ₹50 per kg. The re-order period is 4 to 8 days. The consumption of raw materials varies from 14,000 kg to 18,000 kg per day, the average consumption being 16,000 kg. The carrying cost of inventory is 20% per annum. You are required to CALCULATE:
💡 Show solution AI SOLUTION

Re-order Quantity (EOQ): Using the Economic Order Quantity formula, EOQ = √(2 × Annual Demand × Ordering Cost / Carrying Cost per unit per annum). Annual demand = 16,000 kg/day × 360 days = 57,60,000 kg. Carrying cost per kg = 20% × ₹50 = ₹10 per kg per annum. EOQ = √(2 × 57,60,000 × 1,000 / 10) = √(1,15,20,00,000) = 33,941 kg (approx.)

Re-order Level: Re-order Level = Maximum Daily Consumption × Maximum Re-order Period = 18,000 × 8 = 1,44,000 kg

Maximum Stock Level: Maximum Level = Re-order Level + Re-order Quantity − (Minimum Daily Consumption × Minimum Re-order Period) = 1,44,000 + 33,941 − (14,000 × 4) = 1,44,000 + 33,941 − 56,000 = 1,21,941 kg

Minimum Stock Level: Minimum Level = Re-order Level − (Average Daily Consumption × Average Re-order Period). Average re-order period = (4 + 8) / 2 = 6 days. = 1,44,000 − (16,000 × 6) = 1,44,000 − 96,000 = 48,000 kg

Average Stock Level: Average Stock Level = Minimum Level + ½ × Re-order Quantity = 48,000 + ½ × 33,941 = 48,000 + 16,971 = 64,971 kg

Note: The 5,00,000 units/month production figure is contextual background; since raw material consumption is given directly in kg/day, it is not required for these calculations.