Wergas, Inc. has determined the following for a given year: Economic order quantity 5,000 units Total cost to place purchase orders for the year P 10,000 Cost to place one purchase order P 50 Cost to carry one unit for 1 year P 4 What is Wergas’ estimated annual usage in units?
Answer the following short problems:
- Wergas, Inc. has determined the following for a given year:
Economic order quantity 5,000 units
Total cost to place purchase orders for the year P 10,000
Cost to place one purchase order P 50
Cost to carry one unit for 1 year P 4
What is Wergas’ estimated annual usage in units?
- Alilio Company is planning to build a new plant in Batangas City. The plant is expected to provide additional sales as follows:
First Year P 2.0 million
Second Year P 2.5 million
Third Year P 3.0 million (maximum capacity)
The
Required:
- Estimate the
working capital investments required for the new plant in the 1st, 2nd& 3rd year of operations. - How do these requirements affect the associated cash flows and the viability of the project?
- Ariola Corporation spends Php 220,000 per annum on its collection department. The company has Php 12M in credit sales. Its average collection period is 2.5 months, and the percentage of
bad debts loss is 4%. The company believes that if it were to double its collection personnel, it could bring down the average collection period to 2 months and bad debt losses to 3%. The added cost is Php 180,000, bringing total expenditures to Php 400,000 annually.
Is the increased effort worthwhile if the opportunity cost of funds is 20%? If it is 10%?
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