QUESTION FOUR [25]

4.1 Wonder Wholesalers credit terms to Shina Stores are 30 days but Wonder Wholesalers is prepared to allow a 2% discount if Shina Stores pays the account within 10 days.

Required:

Calculate the cost (as a percentage) to Shina Stores of forgoing the discount. (5)

4.2 The following information has been extracted from the financial records of Lulu Limited for the year ended 31 May 2020: R Cash flows from operating activities 720 000 Cash flows from operating activities (1 260 000) Additions to plant and equipment (1 260 000) Cash flows from financing activities 600 000 Proceeds from shares issued 600 000

4.2.1 Calculate the cash balance as at 31 May 2020 if the cash balance on 31 May 2019 was R200 000 (favourable). (3)

4.2.2 Analyse the cash flows of the company. (7)

4.3 The monthly sales of a product sold by Molda Limited are 150 000 units. The purchase price is R16 per unit. The carrying cost of inventory amounts to 25% of the purchase price. The ordering cost is R12 per order. Calculate:

4.3.1 Annual economic order quantity (EOQ). (4)

4.3.2 The number of orders that need to be placed annually based on the EOQ. (2)

4.3.3 The total ordering costs and carrying costs.