QUESTION 1

1.1 Information: 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. (5 marks)

NB: Round off to the next whole number

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

1.2 Information: Rambo Producers has the following sales forecast for Line 1 Product for the first two months of 2022 (5 marks)

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

	Machinery A	Machinery B
Initial cost	R 100 000	R 110 000
Expected economic life	5 years	5 years
Expected disposal / residual value	R 10 000	0
Expected net cash inflows End of :year 1 Year 2 Year 3 Year 4 Year 5	R 34 000 27 000 32 000 30 000 26 000	R 33 000 33 000 33 000 33 000 33 000
Depreciation per year	18 000	22 000

The company estimates that its cost of capital is 14%.

2.1 Calculate the payback period for Machine A and B (answers must be expressed in years, months and days). (5 marks)

2.2 Calculate the accounting rate of return (on average investment) for Machine A. (answer rounded off to 2 decimal places). (4 marks)

2.3 Calculate the net present value of each machine (round off amounts to the nearest Rand). (6 marks)

2.4 Calculate the internal rate of return for Machine B. (5 marks)