Green Lantern, a pub & grill estimates that it will sell 10 000 beers per year which it will purchase from a distributor in Luanshya. A beer costs K18.00 to purchase and K2.00 in freight charges each. The company borrows funds at 9 % interest rate to finance inventories. Green Lantern's purchasing agent has calculated that it costs K50.00 to place an order for beers and that the handling is K3.00 for each beer.

Required:

(a) Calculate the number of beers that Green Lantern should request in each order.

(Due to the nature of the question you are requested NOT to round off your answer at this point)

(b) Calculate the annual number of orders.

(Due to the nature of the question you are requested NOT to round off your answer at this point)

(c) Calculate the total annual ordering cost.

(You may round off all answers to the nearest two decimal places from this point forward) [3 MARKS]

(d) Calculate the total annual carrying cost.

(e) Determine the order-size decision Green Lantern should make if the Luanshya distributor offers a 5 % discount off the purchase cost excluding the delivery price for minimum orders of 1 824 beers.

(f) Assuming sales are uniform throughout the year (365 days) and the lead time is 9 days; determine the reorder point at the EOQ level.

(g) What is the financial consequence if only 7 orders are placed for the year instead of ordering at the EOQ level?