a) IOU Corporation has an annual usage of 4,000 units. The cost of placing an order...
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a) IOU Corporation has an annual usage of 4,000 units. The cost of placing an order is RM100, and the firm's carrying cost per unit for each quarter is RM0.80. The firm also maintains a safety stock of 20 units. Compute the Total Inventory Cost. (10 marks) b) Akasia Sdn Bhd is facing a cash shortage of RM400,000. As the financial manager, you are required to find a possible financial assistance for a period of 6 months. The company has the following alternatives: Alternative I Obtain a line of credit of RM500,000 from Kemboja Bank with 2 percent commitment fee on the unused funds and 8 percent stated interest rate. The company must maintain a compensating balance of RM80,000. Alternative Il Issue commercial paper with a face value of RM100,000 each at 6 percent interest rate. The cost of issuing these papers is RM5,000 for each paper. Alternative III A discounted loan with 12 percent interest rate and a compensating balance of 20 percent on the face value of the loan. Akasia Sdn Bhd currently maintains a demand deposit of RM50,000. ) Calculate the effective interest rate for each alternative. (9 marks) i) Justify the best alternative for Akasia Sdn Bhd. (1 mark) a) IOU Corporation has an annual usage of 4,000 units. The cost of placing an order is RM100, and the firm's carrying cost per unit for each quarter is RM0.80. The firm also maintains a safety stock of 20 units. Compute the Total Inventory Cost. (10 marks) b) Akasia Sdn Bhd is facing a cash shortage of RM400,000. As the financial manager, you are required to find a possible financial assistance for a period of 6 months. The company has the following alternatives: Alternative I Obtain a line of credit of RM500,000 from Kemboja Bank with 2 percent commitment fee on the unused funds and 8 percent stated interest rate. The company must maintain a compensating balance of RM80,000. Alternative Il Issue commercial paper with a face value of RM100,000 each at 6 percent interest rate. The cost of issuing these papers is RM5,000 for each paper. Alternative III A discounted loan with 12 percent interest rate and a compensating balance of 20 percent on the face value of the loan. Akasia Sdn Bhd currently maintains a demand deposit of RM50,000. ) Calculate the effective interest rate for each alternative. (9 marks) i) Justify the best alternative for Akasia Sdn Bhd. (1 mark)
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Cost Management Measuring, Monitoring and Motivating Performance
ISBN: 978-1119185697
3rd Canadian edition
Authors: Leslie G. Eldenburg, Susan K. Wolcott, Liang-Hsuan Chen, Gail Cook
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