(8 marks)
(4 marks)
Calculating the EOQ.
EOQ =
SQRT(2 * F * T / H) = (2 * 80 * 200,000 / 1.00)0.5
EOQ =
5,656.85 kg
(4 marks)
Calculating the EOQ savings.
Total cost = (F * T/Q) + (H * Q / 2) = (80 * 200,000 / 10,000) + (1.00 * 10,000/2)
Total Cost @10,000 kg =
$6,600
Total Cost EOQ = (F * T / Q) + (H * Q / 2) where Q = 5,656.85 kg
= (80 * 200,000 / 5,656.85) + (1.00 * 5,656.85 / 2) = $5,656.85
Savings with EOQ = $943.15
= $6,600 - $5,656.85 per planning period

(10 marks) Try Q (actually, EOQ) = 5,656.85 kg.
Then total cost = order costs + holding costs + purchase costs
= (80)(200,000) / 5,656.85 + (1.00)(5,656.85) / 2 +…show more content… Note: Using compound interest here is acceptable:
PVDC = -96,470.09
PVDisney = -97,298.19
Question 3 (35 marks)
a.)

Proposed
Terms (E)
$2,750,000
$7,534.25

Sales per 365-day year
Sales per day, S
Sales growth rate, g
-7.27%
Up-front Variable Cost Ratio (VCR)
70.00%
Collection expenses (EXP) at DSO
1.45%
Bad debt expense ratio, b , at DSO
7.00%
Discount percent, d
0
Discount period, days
0
Proportion taking discount, p
0
Non-discount period, days
56
k = company 's annual nominal cost of capital
15%
i = daily cost of capital
15% / 365 =

Note: an annual nominal cost of 15% compounded daily implies an annual effective cost of { [ (1 + .15/365)^365 ] - 1 } * 100 = 16.18% per year.
Cashflow timeline under proposed terms (11 marks)
Proposed Terms
In terms of the Zn formula
1st term
PV from discount period
$0.00
no discount period
2nd term
PV from credit period $6,849.22 = 7,534.25*(1-0.07)/(1+ i*56)
3rd term
4th term