Answers and working steps so that I can work backwards.

Answers and working steps so that I can work backwards.

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Question 1: Inventory Management (10 marks) Perfect Sound Pte Ltd sources for Bluetooth earpiece from China suppliers and sells them in its five retail stores in Singapore. Total annual sales average 40,000 pieces over the last few years and is expected to remain constant. The purchase price of each set of earpieces is $28 and the company’s policy is to keep safety stock equivalent to 7 days of sales in stores. The company currently uses the Economic Order Quantity (EOQ) system to manage its inventory costs. Other costs incurred include the following: Ordering cost per order: Carrying cost per unit: $60 15% of purchase price Required: (Round up your answers to the nearest whole number) (a) Compute the EOQ that will minimize the total inventory management cost for Perfect Sound Pte Ltd. (b) Determine the following costs for the company: (i) Total ordering cost (ii) Total inventory management cost (excluding purchasing cost) (c) Briefly explain the term “Re-order point” with regards to inventory management. Written Assignment Guide / BM5271 / Page 6 Question 2: Working Capital (10 marks) Given the recent economic downturn, the Finance Manager of Star Power is analysing the company’s financing strategy. Selected financial data of the company as at 31 December 2019 are shown below: $ Fixed Assets 4,500,000 Current Assets 5,250,000 Short-Term Liabilities 2,300,000 Long-Term Liabilities 3,800,000 Required: (a) Calculate the net working capital (NWC) of Star Power. (b) Given that short term interest is 3% p.a., find the annual interest rate (in %) on the long-term liabilities if the total annual financing cost of the company is $260,000. (c) Explain the relationship between the predictability of a firm’s cash inflows and its required level of net working capital. Written Assignment Guide / BM5271 / Page 7 Question 3: Cash Management (10 marks) In preparation of X Team Pte Ltd’s financing requirement for the next 12 months, Steven, the finance manager, needs to have a better understand the company’s operating and cash conversion cycles. Details of the company’s financials as at 31 Dec 2019 are as follows: $ Accounts Receivable 620,000 Accounts Payable 350,000 Annual Cost of Goods Sold 5,550,000 Annual Credit Sales 8,650,000 Annual Credit Purchases 2,800,000 Current Assets 1,650,000 Current Liabilities 1,200,000 Inventories 450,000 Annual cash outlay 820,000 Required: (Round your answers to TWO decimal places) (a) Briefly explain the term “cash conversion cycle”. (b) Calculate the following for X Team Pte Ltd: (i) Operating cycle (ii) Cash conversion cycle

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