Explain Consumption based planning and Demand based
planning, which is better and how?
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Answer Posted / kumararvind
CONSUMPTION BASED PLANNING MEANS HOW MUCH THE CONSUMERS ARE CONSUMING THE PRODUCT AT THE PRESENT TIME AND ON THE BASIS OF CONSUMPTION LEVEL THE COMPANY PLANS TO PRODUCE THE PRODUCT, BUT DEMAND BASED PLANNING MEANS-TO PRODUCE THE PRODUCT ON THE BASIS OF PRESENT DEMAND AND PLAN FOR FUTURE ON THE BASIS OF FUTURE PREDICTED DEMAND. CONSUMPTION BASED PLANNING IS BASICALLY FOCUSED ON PRESENT BUT DEMAND BASED PLANNING ALWAYS INCLUDES FUTURE REQUIREMENTS.
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Raj & Raj Ltd purchased a machinery on 01.01.1996 for Rs.88,000.The life of the machine estimated to be 5 Yrs.It was calculated that the old machinery would fetch Rs.8000 at the end of its useful life.it was decided to replace the machinery at the end of the fifth year by setting up depreciation fund and invest the annual depreciation (along with interest earned each year) in gilt edged securities carrying interest at 5% per annum at the end of the 5th year the securities were sold for Rs.62,200 and the old machinery was sold for Rs.9000.As per the sinking fund table Rs.14,478 is to be invested every year.A new machine was purchased on 01.01.2001 for Rs.1,00,000.Pass the journal entries and show the ledger accounts
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