Question: Question 2 [22 Marks] 2.1 Read the below scenario and answer the questions that follow. Tomato Ltd is a local tomato sauce wholesale company based
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Question 2 [22 Marks] 2.1 Read the below scenario and answer the questions that follow. Tomato Ltd is a local tomato sauce wholesale company based in Gauteng. Tomato Ltd annually orders 400000 bottles of tomato sauces from a distributor in Limpopo. A bottle of tomato sauce delivered to the wholesale building of Tomato Ltd costs 40 cents (including freight charges). Tomato Ltd buys inventory (tomato sauces) on credit at an interest rate of \10. The purchasing agent of Tomato Ltd has calculated that it costs Tomato Ltd R20 to place an order for a freshly packed tomato bottle from the distributor and that the variable annual expense (insurance and handling) is 15 cents per tomato sauce bottle. Required: a. Calculate the number of tomato bottles (EOQ) that Tomato Ltd should request in each order. (6 marks) N.B. Round off the final answer to a whole number. b. Calculate the annual number of orders at EOQ. (2 marks) c. Calculate the total annual ordering costs at the EOQ. (2 marks) d. Calculate the total annual carrying cost at the EQO. (2 marks) 2.2 Shrinkage is the accounting term that describes the loss of gross profit attributable to inventory losses, mainly due to theft. List and explain the leading causes of shrinkage for most businesses across the globe and provide an example for each. (10 marks)
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