1. Polik Limited sells exercise bands for $55, and expects the demand for this product to be constant at76 units per week. The exercise bands are ordered from a supplier at a price of $39, and each order takes three weeks to supply the product from the date that Polik Limited places an order.The business holds 120 units of the product as a safety buffer at all times. The cost of capital is 10%. At what level of inventory (in units) should the business reorder the exercise bands?
2. Huyt Limited is considering a change in credit policy which is expected to increaseaccounts receivable from $20,000 to $83,000and increasesales revenue from $240,000 to $332,000with all other working capital items unaffected. Huyt Limited requires a return of12% on investments in working capital. What is the minimum expected increase in profit necessary to justify the change in credit policy?
3. An analysis of the monthly pattern of credit sales receipts shows that on average, customers are paying more slowly than expected. What types of corrective action might management take, as a result of this analysis?
4. In order to reduce holding costs, RTY limited deliberately maintains low levels of raw materials inventory, and has arrangements in place for the supplier to deliver these materials on an as-needed basis two days before their use. Discuss the additional costs to RTY of this arrangement.
5. A supplier requires all accounts to be settled within 40 days, but is offering your business a discount if you settle your accounts within 7 days of purchase. Using the techniques you learnt from ACCY801, you calculate an effective annual interest rate of 14.3%. Explain how you should decide whether to accept the discount and pay within 7 days, or to delay payment as long as possible.
6. Which of the following statements are correct regarding the ABC method of inventory control?

• I.It is based on minimising the total of holding costs plus ordering costs
• II.It classifies inventory into categories based on value
• III.It applies mainly to manufacturing firms
• IV.It results in a minimal level of inventory delivered just in time for production
• V.It requires that most effort and resources are spent on managing high value items