Please solve all questions Megah Berhad sources its component for its annual manufacturing requirement from Ho ChiMinh, Vietnam. The annual payment for the component is RM6 million for an average unitprice of RM20. The holding cost is RM5 per unit per year, including the insurance costs andfinancing costs. The fixed cost per order is RM100.There is a lead time of one month between the placing of an order and delivery of the goods.The fluctuations in demand for the component are anticipated in the next coming months.The stockouts will cost the company RM40 per unit. The following is the probabilitydistribution of estimated usage of the raw material for the month:Usage (units)Probability23,00025,00019,40027,00030,0000.220.360.100.200.12In view of that, the Managing Director suggested that the company should source suppliesfrom many suppliers, locally and overseas. He also suggested that the stockholdings of thecompany should be reduced since the assembly department needed more space.Required:а.Calculate the followings:i.The Economic Order Quantity (EOQ).ii. The number of order that has to be placed in a year.iii. The average usage during the lead time.b.The production manager is cautious on the uncertainty of demand and the inventorymanager is worried about stockouts. It is assumed that the incremental cost of holdingthe safety stock is the same as normal holding costs of stock, and the average safetystock is equal to the total of safety stocks. Determine what level of safety stock shouldbe kept for the component.The Managing Director suggested that the company should source supplies from manysuppliers locally and overseas and the stockholdings of the company should bereduced. Evaluate the managing director's suggestion.С.

EOQ (Economic Order Quantity) = 2A*OC Where, A= Annual demand in units= RM 6000000/ RM 20 O=…

Megah Berhad sources its component for its annual manufacturing requirement from Ho Chi Minh, Vietnam. The annual payment for the component is RM6 million for an average unit price of RM20. The holding cost is RM5 per unit per year, including the insurance costs and financing costs. The fixed cost per order is RM100. There is a lead time of one month between the placing of an order and delivery of the goods. The fluctuations in demand for the component are anticipated in the next coming months. The stockouts will cost the company RM40 per unit. The following is the probability distribution of estimated usage of the raw material for the month:

Megah Berhad sources its component for its annual manufacturing requirement from Ho Chi Minh, Vietnam. The annual payment for the component is RM6 million for an average unit price of RM20. The holding cost is RM5 per unit per year, including the insurance costs and financing costs. The fixed cost per order is RM100. There is a lead time of one month between the placing of an order and delivery of the goods. The fluctuations in demand for the component are anticipated in the next coming months. The stockouts will cost the company RM40 per unit. The following is the probability distribution of estimated usage of the raw material for the month:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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