Question 1 1. A firm has a cash conversion cycle of 120 days, an average collection period of 25 day and an average payment period of 50 days. Calculate the firms average age of inventory. (4 Marks) 2. A firm purchased raw materials on account and paid within 30 days. The raw materials were used in manufacturing finished goods sold on account 100 days after the raw materials were purchased. The customer paid for the finished goods 90 days later. What is the firms cash conversion cycle? (4 Marks) 3. A firm with an average age of inventory of 80 days, average collection period of 60 days, average payment of 50 days. What is the cash conversion cycle? (4 Marks) Question 2 Mpho foods is analysing the performance of its cash management. On average the firm holds inventory for 65 Days, pays suppliers in 35 days and collects its receivables in 15 days. The firm has an annual outlay of R 1960000 on operating cycle investments. Mpho foods currently pays 10% for its negotiated financing. Assume a 360 -day per year. 1. Calculate the firm's cash conversion cycle (4 Marks) 2. Calculate the operating cycle (4 Marks) 3. Calculate the annual savings if the operating cycle is reduced by 15 days ( 4 Marks) Question 3 Browns manufacturing company pays trade and other payables on the 10th day after purchase. The average collection period is 30 days, the average age of inventory is 40 days. The firm currently has sales of about R18 million. The firm is considering a plan that would stretch its trade and other payables by 20 days. If the firm pays 12% per year for resource investment, what annual savings can it realise by this plan? Assume a 365 - day year (15 Marks). Question 4 Saabi and Ltd uses 800 units of a product per year on a continuous basis. The product has a fixed cost of R50 per order, and a carrying cost of R2 per unit per year. It take 5 days to receive a shipment after an order is placed and the firm wishes to hold 10 days usage in inventory as safety stock. 1. Calculate the EOQ (3 Marks) 3 IAC2601 Assessment 22023 2. Calculate the average inventory using a 365-day year (4 Marks) 3. Calculate the re -order point (4 Marks)