$4$

DM$10$

QUESTION $3(25$ Marks$)$

Aggregate planning is capacity planning for a medium$-$term period, for example $3$ to $18$ months. Recall that capacity is the

maximum output that can be produced over a given period of time, for example an hour, a day, a week or a year. Most

organisations develop business plans for the long and medium terms.

With aid of a diagram, explain fully the position of aggregate planning within the sequence of an organisation$$s planning

activities.

QUESTION $4(25$ Marks$)$

It is almost impossible for any organisation to function properly without some form of inventory holding. Unavailability of

goods or services is a cause for customer dissatisfaction. Therefore it is important that the cost of holding inventory is

calculated to determine the impact of these costs on the organisation. One measurement that can be used is return$-$on$-$

investment $($ROI$)$ method. This method can be employed because the monies paid for the inventory can be seen as an

investment. The ROI can be calculated by dividing the profits earned after the deduction of taxes by the value of the total

assets. The larger the reduction in the holding of inventory, the higher is the ROI. Therefore, firms should minimise

inventory holdings in order to maximise shareholder returns.

$4\mathrm{.}1.$ In light of the above, provide a counter argument for the holding of inventory. $(20$ marks$)$

$4\mathrm{.}2.$ Provide a discussion that proves your understanding of what Work in progress inventory is$.(5$ marks$)$