$4\mathrm{.}1$ Describe how the First In$,$ First Out $($FIFO$)$ method is applied to assign inventory costs to inventories and cost of sales, and what impact this has on profitability and taxes.

$4\mathrm{.}2$ A commonly used approach to determine the optimal order level is based on the economic ordering quantity $($EOQ$)$ model. EOQ is the optimum quantity that should be ordered that will minimise the total combined ordering and carrying costs.

$6$ of $9$ Financial Management $1-$ FINMNGT$\_1$

Financial Management $1$

EXAMINATION $-2023\mathrm{.}2$

The equation for the EOQ is:

EOQ$=\sqrt[\phantom{2}]{\frac{2\text{A}\text{n}\text{n}\text{u}\text{a}\text{l}\text{r}\text{e}\text{q}\text{u}\text{i}\text{r}\text{e}\text{m}\text{e}\text{n}\text{t}\text{O}\text{r}\text{d}\text{e}\text{r}cost}{\text{C}\text{a}\text{r}\text{r}\text{y}\text{i}\text{n}\text{g}or\text{h}\text{o}\text{l}\text{d}\text{i}\text{n}\text{g}cost\text{p}\text{e}\text{r}\text{u}\text{n}\text{i}\text{t}}}$

Blueberry food Manufacturers produces $2,000$ tubs of frozen blueberries per day. The company uses a safe, convenient packaging solution for frozen food products. The company works $260$ days a year, on average. The cost of carrying $100$ tubs in stock for the year amounts to R$5$ and the cost of placing an order is R$450.$ The average lead time to order new stock of the tubs is $7$ days. The maximum lead time to order stock is $9$ days.

Required:

$4\mathrm{.}1$ Calculate the EOQ for the tubs. Round up to the next whole number.

$4\mathrm{.}2$ Calculate the total ordering cost per annum to order. Round the number of orders to the next round number.

$4\mathrm{.}3$ Calculate the re$-$order level if the maximum usage is $2,250$ per day.