1. The purchase committee of A Ltd. has been entrusted to review the material procurement policy of the company. The chief marketing manager has…

1. The purchase committee of A Ltd. has been entrusted to review the material procurement policy of the company. The chief marketing manager has appraised the committee that the company at present produces a single product X by using two raw materials A and B in the ratio of 3:2. Material A is perishable in nature and has to be used within 10 days from Goods received note (GRN) date otherwise material becomes obsolete. Material B is durable in nature and can be used even after one year. Material A is purchased from the local market within 1 to 2 days of placing order. Material B, on the other hand, is purchased from neighbouring state and it takes 2 to 4 days to receive the material in the store. The purchase price of per kilogram of raw material A and B is 30and 44respectively exclusive of taxes. To place an order, the company has to incur an administrative cost of 1,200. Carrying cost for Material A and B is 15% and 5% respectively. At present material A is purchased in a lot of 15,000 kg. to avail 10% discount on market price. GST applicable for both the materials is 18% and the input tax credit is availed. The sales department has provided an estimate that the company could sell 30,000 kg. in January 2024 and also projected the same trend for the entire year. The ratio of input and output is 5:3. Company works for 25 days in a month and production is carried out evenly. The following queries/ calculations to be kept ready for purchase committees' reference: