Section B: Calculation-Based Questions (Worth 35 marks) Question B1 (20 marks) AguaFlow Supplies (AFS) is a company that buys and sells water filtration systems. The company buys water filtration units from a manufacturer for $200 each. The manufacturer delivers the units to AFS and bears the delivery costs of $300 per shipment. Each time an order is placed, AFS incurs $400 in paperwork and inspection costs. On average, there is a lead time of 10 days for each order to arrive from the manufacturer to the AFS warehouse. Inventory carrying/holding cost for AFS is 10%. Average yearly demand for the water filtration units is 5,000 units. Answer the following questions, assuming there is no uncertainty about the demand: 1. How many water filtration units should AFS order each time? (2 marks) 2. Now that the lead time has increased from 10 to 12 days, how should AFS change the order guantity and the reorder point of the water filtration units: increase, decrease, or stay the same? Explain why. (8 marks) 3. There are several assumptions in the problem description enabling you to do the calculation in (a). Please list the key assumptions. Which assumptions do you think are the most unrealistic? Suppose AFS uses the order quantity that you calculated in (a), what is the impact on its inventory and logistics management if these unrealistic assumptions are relaxed? (10 marks) Question B2 (15 marks) Nik Manufacturing is a mid-sized company specializing in producing high-quality widgets. The company is evaluating its financial performance for the most recent fiscal year and considering strategies to improve profitability and efficiency. Below is the financial data provided by ABC Manufacturing: Total Sales: $250,000 Cost of Goods Sold (COGS): $10,000 Variable Expenses: $20,000 Fixed Expenses: $35,000 G & 0o o Inventory Value: $10,000 Accounts Receivable: $5,000 Other Current Assets: $5,000 Fixed Assets: $105,000 O o O O 1. What is the firm's net profit margin? What is the firm's Return on Assets (ROA)? Please show your calculation steps in your answer and explain how you calculated each value (5 marks: 2.5 marks for ROA and 2.5 marks for Net profit margin) 2. (2) Suppose the firm manages to reduce its inventory to 7000 and still achieve the same level of sales. Discuss the impact of this change on its Return on Assets (ROA) and overall profitability (10 marks)