FACULTY OF BUSINESS

CENTRE FOR CONTINUING EDUCATION

1. Find the most cost effective assignment of machines to different pack sizes(12 marks)

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Table: 3-Month Production Capacity

Required:

1. Rent-To-Kill Plc buys its products from Kill-Them-All Plc and distributes to nearly 100 pesticide stores in Gaborone. The company wants to analyze total annual inventory costs associated with cockroach chalk, the number one pesticide in its market. The average cockroach (roach chalk) is P8.00 per box. Rent-to-Kill estimated average monthly demand at 7,500 cases. The cost of capital (Rate of Return) for Rent-to-Kill is 15%. Other inventory holding costs such as insurance, warehouse overhead are estimated at 5%, while janitorial services account for 5% as well. Rent-to-Kill purchaser usually prepares an order in 45 minutes on average and is paid P100.00 per hour. Other ordering costs such as postage, telephone and so on are estimated at P25.00 per order. Rent-to-Kill operates 250 days with a lead time of 2 days.

Required:

2. What is the total cost associated with your EOQ? (5 Marks).