Part B Cintra Company sells car cooling systems. Exhausts are purchased from a manufacturer in Japan and shipped to Cintra. Management is expecting an annual demand of 6500 units with a purchase price of $400. Other costs associated with ordering and maintaining an inventory of these cooling systems are shown below. The ordering costs incurred in the purchase order department for placing and processing orders for the past three years are shown below. year Orders placed and processed Total processing costs 1 23 $12,305 66 12,475 103 12,705 Management expects these ordering costs to increase by 20 per cent over the amounts and rates experienced in the last three years. Each order is inspected by NZ customs officers. A fee of $67.20 is charged. A clerk in the receiving department receives, inspects and secures the coolings as they arrive from the manufacturer. The activity requires 3 hours per order received. This clerk has no other responsibilities and is paid at the rate of $34 per hour. Related variable overheads in this department are applied at a rate of $9 per hour. Additional warehouse space will have to be rented to store the new cooling systems. Space can be rented as needed in a warehouse at an estimated cost of $3,500 per year plus $6.25 per cooling. Breakage cost is estimated to average $5 per cooling. Insurance on the inventory costs $1.50 per cooling. Other carrying costs amount to $9.50 per cooling. Cintra works 50 weeks each year with five working days a week . Five working days are required from the time the order is placed with the supplier until it is received. Question 3.2 Assuming all costs other than the order costs remain the same, calculate the following amounts for year 4: [) Economic order quantity (EOQ), (ii) Reorder point in units (ROP) and (ii) Minimum annual relevant cost of ordering and carrying at the EOQ level. (6 marks) Your Answer: EOQ ROP Annual ordering and carrying costs at the EOQ level Question 3.3 Management has been able to negotiate a JIT purchasing agreement with the Japanese manufacturer, and the inspection fee has been renegotiated with the customs officials. These efforts will result in reducing the cost per order to $32.55 and the estimated annual cost of carrying inventory to $55.90 per cooling system. Based on the negotiated effort, calculate the following amounts for year 4: (i] Economic order quantity (EQQ), (ii) Reorder point in units (ROP) and (iii) Minimum annual relevant cost of ordering and carrying at the EOQ level. (6 marks) Your Answer EOC RO Annual ordering and carrying costs at the EOQ level Question 3.4 One of the senior management members, Rob Harrison, is sceptical about JIT implementation and raised several questions such as: how can the company save money if the order size is reduced and the number of orders delivered increased?; how the risk of running down the inventory levels be managed?; and how will these changes impact on the company's strategic priority of product quality and customer satisfaction? Write a report to the Senior Management responding to Mr Harison's concern. Your responses should explain the rationale behind improving supplier relationships and the likely impact of introducing a JIT system in line with the company's strategic priority and the calculations above. (8 marks) [ Word limit: 150 words. Note the word count at the end of your answer] Your Answer (expand the space as required)