$5\mathrm{.}1$ Although the last in first out method is not very recommended, it is unavoidable in certain practical situations. Explain with examples where the LIFO method of handling stock applies. $(4)$

$5\mathrm{.}2$ 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.

Financial Management $1-$ FINMNGT$\_1$

Financial Management $1$

EXAMINATION $-2024\mathrm{.}1$

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

Orders Limited uses $260000$ components per annum $($or $5000$ per week$)$ to manufacture one rail coach. The cost of each component is $R20\mathrm{.}00.$ The manufacturer of the component bills separately for each production run and this is a fixed cost of R$4000$ per run. It has been calculated that the carrying cost of the component is $10\%$ of the cost of the unit.

$5\mathrm{.}2\mathrm{.}1.$ Determine the EOQ in the scenario above.

$5\mathrm{.}2\mathrm{.}2.$ Calculate the reorder point if the lead$-$fime is $4$ weeks