a) AngelHair's Shoppe has an inventory period of 40 days, an accounts payable period of 35 days, and an accounts receivable period of 30 days. Management is considering an offer from their suppliers to pay within 20 days and receive a 5 percent discount. If the new discount is taken, the accounts payable period is expected to decline. Required: Calculate the cash conversion cycle if the management is considering the new offer. (4 Marks) b) Rigatoni Berhad is a company selling deluxe cordless telephone. It sells the telephone for RM95 which costs RM40 each. Last year the company sold 57,600 units. The supplier of the telephone is its subsidiary Rigatoni Suppliers Sdn. Bhd. which recently announced a price increase of RM5. This will force Rigatoni Berhad to increase the selling price to RM100 but anticipate that the demand for the telephone for this coming year to decline by 10 percent. It costs Rigatoni Berhad RM400 to place an order and the carrying costs of the deluxe telephone are 12 percent of costs. The supplier has also indicated that due to increase in processing costs, it will accept orders only in round lots of 1,000 units at the quoted price of RM45. An additional charge of RM50 per order is made on any fractional order. Required: i. Compute the economic order quantity (EOQ) (2 Marks) ii. Compute the total costs of inventory if the EOQ is ordered. (4 Marks) a) AngelHair's Shoppe has an inventory period of 40 days, an accounts payable period of 35 days, and an accounts receivable period of 30 days. Management is considering an offer from their suppliers to pay within 20 days and receive a 5 percent discount. If the new discount is taken, the accounts payable period is expected to decline. Required: Calculate the cash conversion cycle if the management is considering the new offer. (4 Marks) b) Rigatoni Berhad is a company selling deluxe cordless telephone. It sells the telephone for RM95 which costs RM40 each. Last year the company sold 57,600 units. The supplier of the telephone is its subsidiary Rigatoni Suppliers Sdn. Bhd. which recently announced a price increase of RM5. This will force Rigatoni Berhad to increase the selling price to RM100 but anticipate that the demand for the telephone for this coming year to decline by 10 percent. It costs Rigatoni Berhad RM400 to place an order and the carrying costs of the deluxe telephone are 12 percent of costs. The supplier has also indicated that due to increase in processing costs, it will accept orders only in round lots of 1,000 units at the quoted price of RM45. An additional charge of RM50 per order is made on any fractional order. Required: i. Compute the economic order quantity (EOQ) (2 Marks) ii. Compute the total costs of inventory if the EOQ is ordered. (4 Marks)
