Section B [60 marks] QUESTION 3 (20 marks)

Study the scenario provided below and answer all questions that follow. InSight Limited imports reading glasses from China for sale in a Southern African country. During the 2021 financial year, the company adhered to the policy of importing 6 000 pairs of read ing glasses every month. The actual monthly sales of reading glasses by InSight Limited during the 2021 financial year is depicted in Table 2.1 below. The company paid R5 000 to place an order for the reading glasses and a carrying cost of R2.00 for each pair of reading glasses during 2021. January 2021

Table 2.1: Actual sales data for the reading glasses during 2021

Month Actual Sales (Pairs of reading glasses)

January 2021 2 800

February 2021 3 000

March 2021 5 000

April 2021 4 000

May 2021 5 600

June 2021 8 000

July 2021 8 000

August 2021 7 900

September 2021 6 000

October 2021 4 050

November 2021 4 900

December 2021 5 550

3.1 Using the actual sales data provided above, determine the economic order quantity (EOQ) of reading glasses for 2021 financial year. (6 marks)

3.2 Using the EOQ model, determine the number of orders for reading glasses placed by InSight Limited during 2021. (3 marks)

3.3 Suppose that the reading glasses arrive at the premises of Insight Limited 7 days after an order has been placed, determine the level at which Insight Limited had to replenish the stock during 2021 (Assume a 350 working days during 2021). (4 marks)

3.4 Determine how much Insight Limited would save by switching from the current ordering policy to the economic order quantity model. (7 marks)