Patrick Repetse recently became a B.Com graduate, specialising in working capital management. As a result of his excellent academic record he was recruited by a recently established private company. The company is in the retail sector and specialises in the sale of designer bathtubs. Plans are in place to establish branches at other major cities. As an upstart company it was unable to afford to employ separate managers for each of the functional areas. So Patrick was employed as the manager who was responsible for all aspects pertaining to the inventories and debtors of the company. When he started his job at the company, he discovered the following: The company was seeking to expand rapidly and customer satisfaction was the priority. As a result, credit was granted to as many of the applicants as possible and adequate inventories were maintained in order to prevent stock-outs from occurring. The average monthly demand for the bathtubs was 400. The selling price of the bathtubs was R7 500 and a mark-up of 50% on cost was used. All the sales are on credit and the credit terms are 60 days. Collection costs of approximately R50 per unit sold were incurred. The annual holding cost of a bathtub was 1% of the cost of the item. The cost of placing an order for bathtubs was R18.75. The cost of capital was 12%. Patrick has proposed the following to the CEO: - The company should take advantage of a 4% discount from the manufacturer by ordering 100 bathtubs each time instead of ordering the EOQ. - A discount of 2.5% should be granted to those customers who settle their accounts within 15 days. He expects that this is likely to apply to 40% of the sales. REQUIRED: 3.1 Comment on the working capital policy of the company. 3.2 Calculate the annual ordering costs based on the EOQ. 3.3 Calculate the annual profit of the company, without considering Patricks proposals. 3.4 How much will the annual net saving be if the company takes advantage of the 4% manufacturers discount, as proposed by Patrick? 3.5 Determine the expected annual profit to the company if Patricks proposal of a 2.5% settlement discount to customers is approved