Tracey Chen, the CFO, has received numerous emails over the last few months, from David Matthews, the Business Unit Manager of Foleo Retailing NZ. His correspondence has identified serious inventory management issues, allegedly stemming from the Australian operations, which are affecting the performance of his business unit. Assume you are the management accountant for the Foleo Group and have been called into a meeting with Tracey to discuss this issue. Below is an excerpt from the data sent to her by David, which highlights regular instances of stock-outs, indicating poor inventory management. Tracey asks you to look into this data, analyse the inventory management processes of the NZ Warehouse and provide a recommendation for improvement.

"The monthly demand for SliFones in the NZ market is unpredictable, but typically fluctuates between 400 and 700 units per month. Our Warehouse orders 1,600 units every two months, however the maximum that are delivered on any order from Foleo Fones is 800 units, making it impossible to meet demand let alone build up any sort of stock. The reason given by the Australian Warehouse Supervisor is that there simply isn't enough stock of the SliFones to send.

Based on our last 6 months of operations, I estimate that our annual requirement for SliFones will be 6,000 units, and our associated carrying costs for this inventory item is $5.22 per unit. Each time we place an order with Foleo Fones, the order takes a month and a half to arrive and costs our NZ operations $75.28 for the activities required - this is why we only order every two months."

Calculate the following and show your workings:

(a) The optimal order quantity of SliPhones that Foleo Retailing NZ should be ordering, using the EOQ formula

(b) The number of orders that would be placed per year by Foleo Retailing NZ

(c) The total annual cost of ordering and holding the inventory of SliFones, using the order quantity calculated in part (a)