QUESTION 1 (20 Marks) Synergy Bhd sells electrical supplies to building contractors on terms of net 60 . The company needs an additional fund of RM1,000,000.00 to finance its short-term project. The project will take eight (8) months to be completed. Synergy has several alternatives to choose from. Alternative A Synergy has arranged for a line of credit of RM1,000,000.00 with Berkat Bank. The terms of the agreement call for an interest set at 1 percent above prime rate and the interest will be discounted. In addition, the bank required a 10 percent compensating balance. The prime rate is currently 11 percent. Alternative B Issue a commercial paper with a face value of RM100,000.00 each at 9 percent per annum. The issuing cost is RM1,500.00 per paper. Alternative C Forego trade credit with the following credit terms of 3/10 net 60 . REQUIRED: i. Compute the effective cost for each of the alternatives. [9 marks] ii. Choose the best alternative and provide reasons for your answer. [1 mark] Jubima Jaya sells 240,000 cabinets per year. Based on the company's policy, a safety stock of 4 percent from yearly sales is to be maintained. The carrying cost is RM0.60 per unit annually and the ordering costs are RM150.00. The delivery time is 10 days. Order should be placed in multiple of 100 units. REQUIRED: i. Compute the economic order quantity (assume 360 days per year). [2 marks] ii. Compute the total inventory cost. [4 marks] iii. Compute the reorder inventory level. [2 marks] iv. Compute the average inventory. [2 marks] QUESTION 1 (20 Marks) Synergy Bhd sells electrical supplies to building contractors on terms of net 60 . The company needs an additional fund of RM1,000,000.00 to finance its short-term project. The project will take eight (8) months to be completed. Synergy has several alternatives to choose from. Alternative A Synergy has arranged for a line of credit of RM1,000,000.00 with Berkat Bank. The terms of the agreement call for an interest set at 1 percent above prime rate and the interest will be discounted. In addition, the bank required a 10 percent compensating balance. The prime rate is currently 11 percent. Alternative B Issue a commercial paper with a face value of RM100,000.00 each at 9 percent per annum. The issuing cost is RM1,500.00 per paper. Alternative C Forego trade credit with the following credit terms of 3/10 net 60 . REQUIRED: i. Compute the effective cost for each of the alternatives. [9 marks] ii. Choose the best alternative and provide reasons for your answer. [1 mark] Jubima Jaya sells 240,000 cabinets per year. Based on the company's policy, a safety stock of 4 percent from yearly sales is to be maintained. The carrying cost is RM0.60 per unit annually and the ordering costs are RM150.00. The delivery time is 10 days. Order should be placed in multiple of 100 units. REQUIRED: i. Compute the economic order quantity (assume 360 days per year). [2 marks] ii. Compute the total inventory cost. [4 marks] iii. Compute the reorder inventory level. [2 marks] iv. Compute the average inventory. [2 marks]
