Himalayan Engineering Works currently takes four days to convert the raw material and components to finished goods. The firm is considering in buying a set of new machines which will reduce the conversion time to 1.5 days. If the firm decides to buy the machines, how does this decision affect the working capital requirement?

1.Working Capital requirement will increase

2.Working Capital requirement will decrease

3.No change in working capital requirement

4.Change in conversion time has no relationship with working capital requirement

An increase in Economic Order Quantity will lead to

1.Increase in Ordering cost

2.Reduction in inventory carrying cost

3.Reduction in ordering cost and increase in inventory carrying cost

4.Increase in ordering cost and reduction in inventory carrying cost