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 MrY & Mr X run a small practice as manufacturers and need some advice from you as a Cost & Management Accountant

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 MrY & Mr X run a small practice as manufacturers and need some advice from you as a Cost & Management Accountant. You are presented with the following information: it takes them two to four months to receive the raw materials from their suppliers. The firm requires 300 units per month at most; but normally uses 150 units per month. At least 50 units should always remain in the warehouse at all times. Normally they require 1 800 units for their financial period. It costs them N$2.00 each time they order and pay N$0.32 per unit of materials. They rent a warehouse and they are charged a 25% on inventory value per annum. Required: 1.1 At what point should the inventory be replenished? 2 marks 1.2 How many units would they order each? 3 marks 1.3 What would be the annual holding cost? 7 marks 1.4 What would be the annual ordering cost? 2 marks 1.5 What would be the cost of purchasing the inventory for the year? 1 mark QUESTION 2 (17 marks) Tau-Tau Ltd supplied the following information regarding a particular product in inventory: Maximum lead time 5 weeks Minimum lead time 2 weeks Interest rate 5%p.a. Cost price per unit N$20 Ordering cost N$26,52 per order Maximum weekly usage 3 800 units Minimum weekly usage 3 000 units Carrying (holding) cost N$2/unit/year (excluding the cost of capital) Required Calculate the following inventory levels: 2.1 Economic order quantity (5) Number of orders to be placed per year (2) Re-order level (Re-order point) (2) Minimum inventory level (Safety stock) (3) Average inventory (3) Maximum inventory (2) 2.2 2.3 2.4 2.5 2.6