a) The annual demand for Praise Limited's inventory is 10,500 units. The item costs GH400 a...

 

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a) The annual demand for Praise Limited's inventory is 10,500 units. The item costs GH¢400 a unit to purchase. The holding cost for one unit for one year is 12% of the unit cost and ordering costs are GH¢450 per order. The supplier offers a 2% discount for orders of 700 units or more and a discount of 3% for orders of 950 units or more. Required: Determine the cost minimising order size of the company. [10 marks] b) Kwame after his National Service and with no hope of securing a job in the formal sector has decided to run a taxi service. The following forecast has been made for the operation of a service between Abisim and Sunyani. i) Revenue totaling GH¢300 a week for 52 weeks in a year. This is net of fuel and other variable costs. ii) Tyres; four pieces for a year at GH120 per unit. iii) Maintenance and servicing; GH¢120 per month. iv) Salaries GH¢3,000 per year v) Insurance GH¢350 per year The net cash flow will increase at 5% per annum for the next five years due to inflation. The cost of the vehicle is estimated at GH¢28,000. The project appears quite profitable based on the NPV criteria using the Government policy rate of 26%. However the banks are offering rates far higher than the policy rate. Required: You are to calculate the break-even rate for the project. [10 marks) a) The annual demand for Praise Limited's inventory is 10,500 units. The item costs GH¢400 a unit to purchase. The holding cost for one unit for one year is 12% of the unit cost and ordering costs are GH¢450 per order. The supplier offers a 2% discount for orders of 700 units or more and a discount of 3% for orders of 950 units or more. Required: Determine the cost minimising order size of the company. [10 marks] b) Kwame after his National Service and with no hope of securing a job in the formal sector has decided to run a taxi service. The following forecast has been made for the operation of a service between Abisim and Sunyani. i) Revenue totaling GH¢300 a week for 52 weeks in a year. This is net of fuel and other variable costs. ii) Tyres; four pieces for a year at GH120 per unit. iii) Maintenance and servicing; GH¢120 per month. iv) Salaries GH¢3,000 per year v) Insurance GH¢350 per year The net cash flow will increase at 5% per annum for the next five years due to inflation. The cost of the vehicle is estimated at GH¢28,000. The project appears quite profitable based on the NPV criteria using the Government policy rate of 26%. However the banks are offering rates far higher than the policy rate. Required: You are to calculate the break-even rate for the project. [10 marks)