QUESTION 1

1.1 Information: [5MARKS]

Jumbo Ltd produces tables with a steady monthly demand of 24 000 units. Tables require a component that is acquired from the supplier at R50 per unit. The cost of placing an order is R12 per order and the holding cost is 10% of the unit purchase price.

NB: Round off to the next whole number

Required: Number of orders per year based on the economic order quantity.

1.2 Information [5 MARKS]:

Rambo Producers has the following sales forecast for Line 1 Product for the first two months of 2022

January 30 000 units

February 40 000 units

Rambo Producers maintains an inventory, at the end of the month, equal to 20% of the budgeted sales of the following month.

Required: Determine the required number of units that should be produced during January 2022.

QUESTION 2

	MACHINE A	MACHINE B
Initial Cost	R100 000	R110 000
Expected economic life	5 years	5 years
Expected Disposal / residual value	R10 000	0
Expected net cash inflows	R	R
End of: Year 1	34 000	33 000
Year 2	27 000	33 000
Year 3	32 000	33 000
Year 4	30 000	33 000
Year 5	26 000	33 000
Depreciation per year	18 000	22 000

Question 2.1 [5 marks]

Calculate the payback period for Machine A and B (answers must be expressed in years, months and days).

Question 2.2 [4 marks]

Calculate the accounting rate of return (on average investment) for Machine A. (answer rounded off to 2 decimal places).

Question 2.3 [ 6 marks]

Calculate the net present value of each machine (round off amounts to the nearest Rand).

Question 2.4 [ 5 marks]

Calculate the internal rate of return for Machine B.