FASHIONS estimates that The inventory carrying cost is R12 p

FASHIONS estimates that The inventory carrying cost is R12 per unit, MANAGEMENT OF WORKING CAPITAL estimates that it will need 5 000 skirts per month next year. The cost of placing an UESTION2 the most advantageous quantity for the business to order each time fo order is r the ye ar KOZMETIC\'s, a supplier, normal credit terms are 60 days. However, they have 2 KOOL stormer, a 6% rebate if the customer pays off its account within 20 days e the percentage cost to BODY SHOP of not accepting the discount from the buys and sells a particular type of electrical fan. It uses the First-in first-out method for lowing information to calculate the value of the closing inventory and the gross profit for supplier valuing its closing inventories Us alf year ended 30 June 2018. B: Use the Statement of Comprehensive Income format. ORMATION: Inventories Opening Purchased Purchased Purchased Purchased Quantity 80 150 200 100 50 Unit cost Months January February April May June R160 R180 R160 R200 R210 Total R12 800 R27 000 R32 000 R20 000 R10 500

Solution

Answer 1: The Question is based out from the concept of \"Economic Order Quantity (EOQ)\". Economic order quantity is the ideal quantity that a firm should be ordering with minimum resources.

EOQ = (2 * S* D/H)^1/2   or square root of ((2* S* D/H)

Asuming that inventory cost provided is per year (i.e.R12 per unit per year)

S = set up cost (here cost ofplacing order) = R 30

D = Demand = 5000 skirts per month

H = inventory carrying cost (per month per unit) = R12/12 = 1

Hence EOQ = (2* 30 * 5000/1)^1/2

^{= 547.72 units or 548}

^{Hence it is advantagous for ordering 548 units everytime to reduce cost.}

S = set up cost ( here order cost ) = R30

D = Demand rate (per month)