Question $1$

$(15$ Marks$)$

Study the information provided below and answer the following questions.

INFORMATION

DMT Enterprises manufactures a product from a raw material, which it purchases at R$108$ per kg$,$ incurring a handling cost of R$500$ plus freight of R$1000$ per order. The incremental carrying cost of inventory of raw material is R$0\mathrm{.}50$ per kg per month. In addition, the cost of working capital finance on the investment in inventory of raw materials is R$8$ per kg per annum. The annual production of the product is $189000$ units, and $2$ units of the product are obtained from one kg of raw material.

REQUIRED:

$1\mathrm{.}1.$Calculate the economic order quantity for the raw materials.

$1\mathrm{.}2.$ Plot on the same graph, the holding cost curve, the ordering cost curve, and the total inventory management cost curve of the raw material. Use an input range of $300-5500kg$ of the raw material at intervals of $200$ kg $.$

$(5)$

$1\mathrm{.}3.$ The operations manager at DMT Enterprises aims to standardise order placements on a quarterly basis. Evaluate the percentage discount on the price of raw materials that the operations manager should negotiate with

$(6)$ the supplier $($round off answer to one decimal place$).$