Solve required i and ii ASAP.

1. A manufacturer is considering implementing Just in time inventory system for some of its raw material purchases. As per the current inventory policy, raw materials required for 1 month's production and finished goods equivalent to the level of 1 week's production are kept in stock. This is done to ensure that the company can cater to sudden spurt in consumers' demand. However, the carrying cost of inventory has been increasing recently. Hence, the consideration to move to a more robust just in time purchasing system that can reduce the inventory carrying cost. Details relevant to raw material inventory are given below: Average inventory of raw material held by the company throughout the year is 1 crore. Procurement of raw material for the year is 12 crore. By moving to just in time procurement system, the company aims at eliminating holding this stock completely in its warehouse. Instead, suppliers of these materials are ready to provide the goods as per its production requirements on an immediate basis. Suppliers will now be responsible for quality check of raw material such that the raw material can be used in the assembly line as soon as it is delivered at the company's factory shop floor. Increased quality check service done by the suppliers as well as to compensate them for the risk of holding the inventory to provide just in time service, the company is willing to pay a higher price to procure raw material. Therefore, procurement cost will increase by 30%, total procurement cost will be 15.6 crore per year. Consequently, quality check and material handling cost for the company would reduce by 1 crore per year. Similarly, insurance cost on raw material inventory of 20 lakh per year need not be incurred any longer Raw material is stored in a warehouse that costs the company rent of 3 crore per annum. On changing to Just in time procurement, this warehouse space would no longer be required Production is 150,000 per year. The company plans to maintain its finished goods inventory equivalent to 1 week's production. Despite this, in order to have a complete cost benefit analysis, the management is also factoring the possibility of production stoppages due to unavailability of raw material from the suppliers. This could happen due to of delay in delivery or non-conformance of goods to the standard required. Labor works in one 8-hour shift per day and will remain idle if there is no material to work on. Due to stoppage of production for the above reason, it is possible to have stockout of 3,000 units in a year. Stockout represents lost sales opportunity due to unavailability of finished goods, the customer walks away without purchasing any product from the company. Therefore, in order to reduce this opportunity cost and to make up for the lost production hours, labor can work overtime that would cost the company 210 lakh per annum. This is the maximum capacity in terms of hours that the labor can work. With this overtime, stockout can reduce to 2,000 units. Currently, sale price of phone is 5,000 per unit, variable production cost is 2.000 per unit while variable seling. general and administration (SG&A) cost is 750 per unit. Raw material procurement cost is currently 800 per unit, that will increase by 30% to 1,040 per unit under Just in time inventory system, On an average, the long-term return on investment for the company is 15% per annum. Required O CALCULATE the benefit or loss if the company decides to move from current system to Just in Time procurement system. RECOMMEND factors that the management needs to consider before implementing the just in time procurement system