QUESTION TWO [25] You are the financial manager of Ferry Constructions, a small construction firm. The owners are concerned about their inventory management, where up until now, ordering of raw materials has been haphazard and largely by guesswork. The owners of Ferry Constructions are anticipating an upsurge in demand for their services. They realise that they need to manage their inventory effectively if they want to be a successful player in the construction industry. They have asked you to look at their anticipated brick consumption and make appropriate recommendations. The following data is relevant: Budgeted consumption maximum 300 000 bricks/month minimum 100 000 bricks/month average 200 000 bricks/month annual 2 400 000 bricks/year Lead time for delivery from the brick manufacturer is a maximum of two months, a minimum of two weeks, and an average of one month Price per brick is R2 Holding cost is 10% of stock value Ordering cost is R1 500 per order ADVANCED DIPLOMA IN FINANCIAL MANAGEMENT ACADEMIC AND ASSESSMENT CALENDAR DISTANCE REGENT BUSINESS SCHOOL (RBS) JANUARY 2022 17 Required: 2.1 Draft a report to the members of Ferry Contructions in which you advise them on: 2.1.1 Appropriate circumstances which determine when businesses might maintain high or low inventory levels. (8) 2.1.2 How to determine their ideal inventory levels. (8) 2.2 Calculate the following for Ferry Contrcutions: 2.2.1 Economic Order Quantity. (5) 2.2.2 Reorder level. (4)