Question

6. The demand for cars at Delta Motors is 500 units per month. The company incurs P4,000 each time an order is placed. The cost of each cycle is P500 and the holding cost is 20%. Compute the number of cars that Delta Motors should order in each replenishment lot.                  

7. You just signed a contract to receive P1000 at the end of one year. If the annual interest rate is 7%, what is this worth today?             

8. As at January 1, 2022, what is the value of P10,000 deposited on July 1, 2016, which accumulates interest at 16% compounded quarterly?  

Answer 1

6.

Number of Cars that Delta Motors should order in each replenished Lot = EOQ ( Economic Order Quantity)

TQ = Annual Units Required = 6000 ,  OC = Ordering Cost per Order = 4000

UC = Inventory Cost / Unit = 500 , CC = Carrying Cost as %age of Unit Cost = 20%

Hence , EOQ ( Economic Order Quantity) will be as follows

=

=

= 693 Units

7.

Amount Receivable after One Year = 1000

Interest rate = 7%

Present Value / Today's Worth (Simple Interest) = Amount / ( 1 + Interest )

= 1000 / 1.07 = 934.58

Present Value / Today's Worth (Continuous Compounding) = Amount / e^Interest

= 1000 / 1.0725 = 932.40

8.

Principle = 10,000, Interest = 16% Yearly or 4 % Quarterly , Compounding = Quarterly

Time = 5.5 Years or 22 Quarters

Amount after 5.5 Years i.e., on January 01, 2022 will be as follows

= Principle x ( 1 + Interest )^Time

= 10,000 x ( 1 + 0.04 )²²

= 23,700