11.1.4 FINANCIAL MANAGEMENT [100] QUESTION ONE [25]

1.1 ABI Traders Ltd wholesales beverages and annual sales amount to 900 000 units. Orders are placed in multiples of 300 units. The purchasing price is R3 per unit. The carrying cost of inventory equals 25% of the purchase price of goods. The ordering cost is R60 per order. Three days are required for delivery. The desired safety stock for the firm is 30 000 units. This amount is on hand. Required:

1.1.1 Calculate the EOQ for ABI Traders Ltd. (3)

1.1.2 Determine the number of orders to be placed each year. (2)

1.1.3 Determine the reorder point for inventory. (2)

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