QUESTION 4 (20 Marks) Use the information provided below to answer the following questions. INFORMATION Fords Struandale Engine Plant in Gqeberha (formerly Port Elizabeth), which assembles the 3.0L V6 Diesel engine for the Next-Gen Ranger and the range-topping VW Amarok, uses 900 000 units of a certain component in the production of engines annually. The components are purchased from suppliers at R200 per unit. It costs the Struandale Engine Plant R500 per order and the carrying cost is 5% of the purchase price. Required:

4.1. Determine the economic order quantity (EOQ) of the component. (5marks)

4.2. The current ordering policy at the Struandale Engine Plant is to order 100 000 units of the components every time it places an order with suppliers. By calculating the total annual ordering cost and the total annual carrying cost, evaluate the optimality of the current ordering policy. (8marks)

4.3. Determine the saving that can be made by the Struandale Engine Plant if it switches the ordering policy to the EOQ model. (7marks)