Question

plaese help with accounting and financial management

QUESTION 4 4.1 Rover Traders is considering selling a refrigerator to a customer on credit. The cost of the refrigerator is R8 000 and the selling price is R10 000. A credit term of 2/10 net 30 was agreed upon. The cost of capital to Rover Traders is 15% Required: Use the information given above to answer the following questions: 4.1.1 Calculate the profit that Rover Traders wou ld make if the account is settled within 10 days. 4.1.2 Should the customer fail to pay the amount due and the account is written off after 90 days, what (4) would be the loss to the firm? (3) 4.2 The annual sales of product Y of Govender Limited is 400 000 units. The purchase price is R12 per unit. The carrying cost of product Y amounts to 30% of the unit purchase price. The ordering cost is R45 per order. Required: Use the information provided above by Govender Limited to calculate the: 4.2.1 Economic order quantity (EOQ) 4.2.2 Number of orders that need to be placed each year. (5) (2) 4.3 Jumbo Enterprises plans to borrow R1 000 000 for one year. The stated interest rate is 15% per annum Required: Use the information provided above to calculate the effective interest rate if: 4.3.1 the interest is discounted 4.3.2 there is a 25% compensating balance requirement (3) (3)

Answer 1

4.2

4.2.1 Economic Order Quantity( EOQ)= 3162 UNITS

Annual Demand (A)= 400,000 units

Purchase Price = R 12/unit

Carrying Cost (C )=30%(R12)=R 3.60

Ordering Cost (B )=R 45/order

EOQ=Square root of (2*A*B/C)=Square root of(2*4,00,000*R 45/R 3.60)=3162 UNITS

4.2.2 Number of orders to be placed each year=127 orders

Number of Orders=Annual Demand/EOQ

=400,000/3162=127 orders