Question

1.1 ADR Ltd purchases a particular item in lots of 1 250 units. Its annual usage of this item is 6 250 units. Ordering costs are R200 per order and the carrying (holding) costs are R10 per unit per year.

Calculate each of the following:

1.1.1 The Economic Order Quantity (EOQ) in units

1.1.2 Number of orders

1.1.3 Cost of orders (Order costs)

1.1.4 Average inventory held

1.1.5 Cost of holding stock (3) 1.1.5 Total cost

1.2 Study the extract from the statement of comprehensive income of CPQ Traders for the 2017 and 2018 financial years and answer the questions that follow: 2017 R 2018 R Sales 600 000 720 000 Gross profit 200 000 280 000 Expenses 185 000 206 000 Net profit 15 000 74 000

1.2.1 By how much did sales increase in 2018?

1.2.2 Calculate the cost of sales for 2017

1.2.3 Calculate the mark-up % on cost for 2017

1.2.4 Calculate the gross margin for the year 2018

1.2.5 Calculate the expenses as a percentage of sales for the year 2018

Answer 1

oreder. 2x Anoual Demand x Cany Lost carying cost 2 x 6250 x 200 10 500 No of orders = 6250 + 500 13 orders %3D 12.6 O Cost of ordeo = 2600 200 x 13 =