Tropic Pvt Ltd was engaged in the business of manufacturing Product P. The product P required 2 units of Material R. The company intends to sell…

Tropic Pvt Ltd was engaged in the business of manufacturing Product P. The product P required 2 units of Material R. The company intends to sell 24,000 units of Product P and does not wish to retain any closing stock. However the opening stock of Product P is 4,000 units. Raw Material R has to be procured after considering the opening stock of R amounting to 10,000 units. The technical team further confirms that the yield in the course of manufacture of Product P is 80% of the input. The company presently procures its annual requirement of materials on a quarterly basis from its regular supplier enjoying a discount of 2.5% on the invoice price of the material of 20 per unit. Every time the company places orders for Material R, it incurs 125for each of the order placed. The company also has taken a rented warehouse for storing material R and the annual cost of storage is 10 per unit. The company appointed Mr. T a Chartered Accountant to review the cost of inventory and provide measures of improvement of cost. After reviewing the material purchase and consumption pattern, Mr. T suggested that the implementation of Wilson's EOQ would be beneficial to the company. He emphasized that the change in the quantity ordered would result in reduction of inventory carrying costs. Mr. T further reviewed the labour costing and identified that the employees were paid overtime wages to ensure timely completion of projects. Overtime wages comprised of daily wage and 100% of daily wages as overtime premium. Based on the cost record it was understood that every month had 180 hours of regular working hours which was remunerated at 200 per hour and Overtime of 20 hours which was remunerated at 400 per hour. Mr. T suggested that the above time taken may be considered as standard and a scheme of Incentive be introduced to reduce overtime cost. He further indicated that Rowan scheme of incentive be used to measure performance and the improved productivity per hour would be 125 units per hour. In this regard, address the following queries in line with the suggestions provided by Mr. T to Tropic Pvt Ltd.