QUESTION 1 (40 MARKS) 1. Afirm's telephone account would normally be classified into the following category: A Fixed cost D Variable cost Stepped fixed cost E None of the above C Semi-variable cost 2. The following statement is NOT true: Total ordering cost = Cost per order x Number of orders Total holding cost Average inventory x Holding cost per unit per year Total inventory cost = Total ordering cost + Total holding cost D Average inventory = Minimum inventory level - % (Economic order quantity) E Re-order level = Maximum usage x Maximum lead-time 3. The following statement is NOT true: A Inventory can be classified as raw material, work-in-progress or finished goods. B Carrying cost includes all costs relevant to the holding of an item in inventory. C Lead-time refers to the time that passes from the point that an order is placed until the raw material/goods are delivered D The minimum inventory level = safety stock Maximum inventory level = Re-order level - EOQ-(Minimum usage x Minimum lead-time) E 4. During March 2019 a firm produced 5 500 units of a certain product. The total costs for the month were as follows: Fixed cost N$ 16 500: Variable cost N$22 000. The total cost per unit for the production of 5 000 units will be: A N$3,00 D N $7,00 B N$4,00 E N$7,50 C N $7,30 Page 12 of 27 Questions 5 and 6 are based on the following: Bushbuck Ltd supplied the following figures regarding the number of units produced during the past six months together with the corresponding production cost: Production units Production cost (NS) 600 645 680 650 720 750 5. According to the high-low method of separating fixed and variable costs, the variable cost rate is: A N$1,75 per unit D N $4,75 per unit B N$2,75 per unit E N$5,75 per unit C NC 75 N$3,75 per unit 6. According to the high-low method of separating fixed and variable costs, the fixed cost is: A N$562,50 D N $475,00 B N$422,50 N$425,00 C N $375,00 The following information refers to questions 7 and 8: Annual usage Average lead-time Maximum requirements per week Minimum requirements per week Re-order quantity 7 000 units 2 weeks 180 units 120 units 1 000 units 7. The re-order level is: A 60 360 E 380 B C 160 260 8. The minimum inventory level is: A B C 60 160 260 D E 360 380 Page 13 of 27