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QUESTION TWO [30] 2.1 Bull Brand Ltd has annual, non-seasonal credit sales of R2 600 000. Customers are expected to pay within 30 days, but

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QUESTION TWO [30] 2.1 Bull Brand Ltd has annual, non-seasonal credit sales of R2 600 000. Customers are expected to pay within 30 days, but in fact have been settling in an average of 42 days. Bull Brand Ltd experiences a bad-debt rate of 0.8% of debtors annually. The company's current overdraft facility is 2.5% above base-rate, which is at present 12%. Unfortunately, the overdraft limit has nearly been reached, and is unlikely to be extended. Bull Brand Ltd has contacted Buck Ltd, a factoring firm, and has been quoted: a) A factor charge of 1.8% of credit sales (Bull Brand estimates that this would save R20 000 administration costs per year) b) An advance of 75% of invoices at 3% over base-rate. Should Buck's terms be agreed to? (Support your answer with calculations). (15) 22 Bayer Ltd produces chemicals to sell to wholesalers. One of the raw materials it! buys is sodium nitrate which is purchased at the rate of R22.50 per ton. Bayer's forecasts show an estimated requirement of 5 750 000 tons of sodium nitrate for the coming year. The annual total carrying cost for this material is 40% of acquisition cost and the ordering cost is R595. (2) ADVANCED DIPLOMA IN FINANCIAL MANAGEMENT - ACADEMIC AND ASSESSMENT CALENDAR DISTANCE 2.2.1 Define economic order quantity, lity, proge 24 page 52 2.2.2 Calculate the most economical order quantity. 2.3 Study the information below and answer the questions that follow Normal usage or average requirement Maximum usage Minimum usage Re-order period Time required to receive emergency supplies 700 units per day 800 units per day 600 units per day 25 to 30 days 4 days + Safelsor Calculate the following: 2.3.1 Ordering point Mas daily weekly Imonthly elsage xlead time 2.3.2 Minimum limit/level 2.3.3 Danger level

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