The credit analyst for Mazibuko Limited has established thefollowing data relating to the working capital cycle of thefirm:
Credit payment period for raw materials 30 days
Raw material delivery to completed goods 50 days
Debtors collection period 80 days
Completed goods to credit sales 20 days
Required:
Calculate the following:
3.1.1 The cash conversion cycle (2 marks)
3.1.2 The period during which financing will be required (1mark)
3.1.3 Discuss four measures that can be implemented to reducethe period for which financing is required (4 marks)
3.2 Sadida (Pty) Ltd sells different grades of cheese to thegeneral public as well as to other retailers. The company hired youas its management accountant two months ago. Recently, you havebeen tasked with instituting measures to reduce the company’srapidly increasing costs. After some research, you have come to therealization that the company does not make use of Economic OrderQuantity (EOQ) and you believe that this will be a good place tostart your cost-reduction journey. You have therefore rounded upthe following information regarding one of its products:
- Question 3 20 Marks The Credit Analyst For Mazibuko Limited Has Established The Following Data Relating To The Working 1 (16.89 KiB) Viewed 37 times
3.2.1 Calculate the economic order quantity for the company.Note: round off your answer to the nearest whole number. (5marks)
3.2.2 Calculate the total ordering cost for the company. Note:Round off your calculations to the nearest whole number. (4marks)
3.2.3 Calculate the reorder point for the company (4 marks)
Weekly demand Purchase price per unit Cost of placing an order Insurance Direct stockholding costs Lead time Safety inventory 2 650 units R180 R230 10% of the purchase price R17 per unit 2 weeks 1 week's demand