Question 5

20 Marks

5.1 Given the following information, what is the annual inventory turnover ratio?

Revenue	R2,2000,000
Cost of Revenue	R1,250,000
Quarter 1 Ending Inventory	R85,000
Quarter 2 Ending Inventory	R98,000
Quarter 3 Ending Inventory	R125,000
Quarter 4 Ending Inventory	R68,000

(4 Marks)

5.2 Given the following information, compute the economic order quantity, annual holding cost, annual order cost, and annual total inventory cost.

Annual requirements (R) = 50,000 units

Order cost (S) = $150 per order

Holding rate (k) = 15%

Unit cost (C) = $100 per unit

(8 Marks)

5.3 A current warehouse system has six warehouses with 3,000 units at each warehouse. If the company desires to change the number of warehouses to become more decentralized and keep the same customer service level, determine the average warehouse inventory levels, using the number of warehouses below and the square root rule.

a) nine warehouses

b) twelve warehouses

c) What is the percentage increase in system inventory for the two systems above, compared to the original system?

(4 Marks)

5.4 What are the negative impacts of logistics on environmental sustainability? How can these be minimised?

(4 Marks)