An association dealing in housing provision to its members in Zambia has contracted with

QZ Itd, a micro$-$institution and also a provider of other financial services established in

$2013$ in which you are a Chief Financial Officer.

Contract terms, among others, include $QZ$ Itd printing and supplying the housing

association with continuous cheque stationery at a specified and mutually agreed price.

The contract doesn't permit the use of a competitor because of the need to comply with

the $QZ$ Itd's systems and for security purposes.

The cost per cheque has been pegged at K$50.$ Nevertheless $QZ$ ltd is willing to discount

this price for bulk purchase of cheques. If the association would purchase cheques in

accordance with the discount agreement, in batches of $1,000,$ then the cost per cheque will

be reduced to $K27.$

The housing association has estimated a monthly demand of $5,500$ cheques.

requires $4$ days' notice from the date of order to the date of delivery.

In addition the cost per order has been estimated at a modest K$8$ and the holding cost at

K$2$ per annum.

Required:

i$.$ Calculate the economic order quantity $($EOQ$),$ the number of yearly orders and the

total cost of holding, ordering and purchasing cheques for the first year. $5$ Marks

ii$.$ Give an advice on whether the bulk discount should be accepted, taking into

account both financial and non$-$financial factors.

iii. An evaluation of payment methods which could be utilized as an alternative to

cheques, stating both the advantages and disadvantages of each method identified.

Consider the modern payment methods and mechanisms on the financial market

now