Problem $3$:

a$)$ Ahmed Company makes headwear that is very popular in the fall$-$winter season. Units

sold are anticipated as:

$\backslash$table$[[,\backslash$table$[[1,250],[2,250],[4,500],[\frac{3,500}{11,500}$ units$]]]]$

If seasonal production is used, it is assumed that inventory will directly match sales for each month and there will be no inventory buildup.

However, Antonio decides to go with level production to avoid being out of merchandise.

He will produce the $11,500$ items over four months at a level of $2,875$ per month.

a$.$ What is the ending inventory at the end of each month? Compare the unit sales to the units produced and keep a running total.

b$.$ If the inventory costs $$8$ per unit and will be financed at the bank at a cost of $12$ percent, what are the monthly financing cost and the total for the four months? $($Use I percent or the monthly rate.$)$

b$)$ Sohar Food Company has decided to buy a new computer system with an expected life of three years. The cost is $$150,000.$ The company can borrow $$150,000$ for three years at $10$ percent annual interest or for one year at $8$ percent annual interest.

How much would Sohar Food Company save in interest over the three$-$year life of the computer system if the one$-$year loan is utilized and the loan is rolled over $($re borrowed$)$ each year at the same $8$ percent rate? Compare this to the $10$ percent three$-$year loan.

What if interest rates on the $8$ percent loan go up to $13$ percent in year $2$ and $18$ percent in year $3?$ What would be the total interest cost compared to the $10$ percent, three$-$year loan?