SECTION B

$[60$ MARKS$]$

Answer ANY THREE $(3)$ questions in this section.

QUESTION $3$

$(20$ Marks$)$

$3\mathrm{.}1$ Examine the information provided below and answer the following questions.

INFORMATION

Each month, Neoplan Manufacturing Limited $($NML$)$ purchases a fixed quantity of a key component$-$Component Kused in its production process. For the upcoming financial year, NML plans to acquire R$240$ million worth of Component K at a price of R $500$ per unit. Component K is consumed at a constant rate throughout the year. NML places orders at the beginning of each month to meet this demand, incurring a cost of R$2484\mathrm{.}40$ for each order. The holding cost for Component K is R$10\mathrm{.}60$ per unit per year.

REQUIRED:

$3\mathrm{.}1\mathrm{.}1$ Calculate the Economic Order Quantity for Component K$.$

$(4$ Marks$)$

$3\mathrm{.}1\mathrm{.}2$ Evaluate whether Neoplan Manufacturing Limited $($NML$)$ should adopt the Economic Order Quantity

$(8$ Marks$)($EOQ$)$ model for ordering Component K $.$

$3\mathrm{.}2$ Based on the detailed information provided below, answer the following questions.

INFORMATION

Southern Furniture Works Limited $($SFW$)$ manufactures contemporary sofas. In addition to its normal budgeted production, the company has recently received a request for a one$-$time special order of sofas. This order must be completed within two weeks. The following cost estimate for the special order has already been prepared:

$\backslash$begin$\{$tabular$\}\{|$l$|$l$|$r$|\}$

$\backslash$hline & & $\backslash$multicolumn$\{1\}\{|$c$|\}\{$ R $\}\backslash \backslash$

$\backslash$hline Direct materials: & & $\backslash \backslash$

$\backslash$hline Fabric & $\backslash (200\backslash$mathrm$\{$~m$\}^\{2\}$ @ $\backslash$mathrm$\{$R$\}350\backslash )$ per m$^2$ & $70000\backslash \backslash$

$\backslash$hline Wood & $\backslash (50\backslash$mathrm$\{$~m$\}^\{2\}$ @ $\backslash$mathrm$\{$R$\}300\backslash )$ per m$^2$ & $15000\backslash \backslash$

$\backslash$hline Direct labour: & & $30000\backslash \backslash$

$\backslash$hline Skilled & $200$ hours @ R$150$ per hour & $36000\backslash \backslash$

$\backslash$hline Semi$-$skilled & $300$ hours @ R$120$ per hour & $15000\backslash \backslash$

$\backslash$hline Factory overheads & $500$ hours @ R$30$ per hour & $166000\backslash \backslash$

$\backslash$hline Total production cost & & $16600\backslash \backslash$

$\backslash$hline General fixed overheads as $10\backslash \%$ of total production cost & & $182600\backslash \backslash$

$\backslash$hline Total cost & & $\backslash \backslash$

$\backslash$hline

$\backslash$end$\{$tabular$\}$