1. Based on an EOQ analysis (assuming a constant demand), the optimal order quantity is 2,500. The company desires a safety stock of 500 units. A 5-day lead time is needed for delivery. Annual inventory carrying costs equal 25% of the average inventory level. The company pays P4 per unit to buy the product, which it sells for P8. The company pays P150 to place a detailed order, and the monthly demand for the product is 4,000 units. Compute for the annual inventory carrying costs.
2. A firm has daily cash receipts of P300,000. A bank has offered to provide a lock box service that will reduce the collection time by three days. The bank required a monthly fee of P2,000 for providing this service. If monthly rates are expected to average 6% during the year, what is the additional annual income (loss) of using the lock box system?
3. On January 7, 2021, Dang Company discounted its own P100,000, 180-day note at the Bank of the Philippine Islands at a discount rate of 20%. Dang repaid the note on the July 6, 2021, its due date. Based on a 360-day year, what was the effective rate of interest on the borrowing?
4. Ana Company sells 20,000 radios evenly throughout the year. The cost of carrying one unit of inventory for one year is P8, and the purchase order cost per order is P32. What is the economic order quantity?
5. Down Under Company's budgeted sales and budgeted cost of sales for the coming year are P126 million and P72 million, respectively. Short-term interest rates are expected to average 10%. If Down Under can increase inventory turnover from its current level of nine times per year to a level of 12 times per year, its cost saving in the coming year are expected to be ___________.