QUESTION $1$

$(20$ Marks$)$

$1\mathrm{.}1$

REQUIRED

Study the information provided below and determine whether Neston Traders should borrow the cash to settle the account. Motivate your answer by calculating the cost of forfeiting the discount $($expressed as a percentage to two decimal places$).$

$(5$ marks$)$

INFORMATION

Neston Traders purchased inventory on credit for R$30000.$ The supplier offered Neston Traders the option to settle the account by paying R$28800$ up to $10$ days after the sale or pay R$30000$ by the end of $60$ days. Neston Traders can borrow cash from its bank at a rate of $18$ percent per annum to settle the account within $10$ days.

$1\mathrm{.}2$

REQUIRED

Use the information provided below to calculate the economic order quantity.

$(5$ marks$)$

INFORMATION

Maxwell Wholesalers anticipates sales of $10000$ units per month, a purchase price of R$40$ per unit, an ordering cost of R$12$ per order, and a carrying cost of $20\%$ of the unit cost price.