Question 3 - Show your workings.

a. XYZ Corporation manufactures and sells widgets. The company is reviewing its inventory management for a particular widget. They expect to sell 36,000 widgets next year. The cost price of each widget is RM5.50, and it is sold individually. Storage and other carrying costs are estimated at RM0.20 per widget. The ordering cost is RM50 per order.

Based on the above information, you are required to calculate:

i. the optimal economic order quantity. (2 Marks)

ii. the total annual cost of purchasing, ordering, and carrying for the company if it orders in this quantity. (6 Marks)

iii Discuss the impact of inflation on the cost of inventory by giving 3 points with examples. (6 Marks)

b. Laju Sd. Bhd. has RM5 million in inventory and RM2 million in accounts receivable. Its average daily sales are RM100,000. The company's payables deferral period (accounts payable divided by daily purchases) is 30 days.

i. What is the length of the company's cash conversion cycle? (2 Marks)

ii. Based on the answer in (b. i.), discuss TWO (2) advantages if there will be a reduction of CCC days for Laju Sdn. Bhd. (4 Marks)

{Total: 20 Marks)