Question ONE

1.1 Explain the meaning of the term "economic order quantity" and explain the significance of calculating this value (2)

1.2 State any 3 assumption of the EOQ model (3)

1.3 The Blue Oyster buys and sells golf balls to member of the public. The balls cost R9 each. The Blue Oyster estimates that they would place orders for 6 500 000 golf balls for the ordering cost is R 600. Calculate the EOQ (4)

1.4 Bramble Traders has an inventory turnover of 7 times. Debtors take 40 days to settle their bills and Bramble Traders settle their payables in 47 days.

Credit sales are R 1 800 000 p.a. and cost of sales is 60% of sales.

1.4.1 The cash conversation cycle and explain your answer. (4)

1.4.2 The average investment in the cash conversation cycle (7)