Namib Grapes CC is registered is a company that buys Grapes from Aussinkher farm, this farm is situated in the south of Namibia. Namib Grapes and Aussinkher Farm agreed on a normal delivery time of two weeks and in difficult circumstances a maximum delivery time of four weeks is allowed. This agreement was reached after taking into account that Grapes can only be transported across by a mini truck that does not exceed the speed of 60 km per hour. After careful analysis of the operations of Namib Grapes, the following information became available:
Normal usage
5 000 units per week
Purchase price per unit $20,00
Average storage cost per unit per annum $ 3,50
Cost of placing an order $75,00
Prime interest rate 10%
Production weeks per annum 48
The purchase of grapes is financed using an overdraft facility.
REQUIRED
1. Calculate the re-order level.
2. Calculate the safety stock.
3. Calculate the economic order quantity.
4. Calculate the average stock level.
5. Calculate the numbers of orders per year
6. Calculate the ordering cost per year