Calculate the reorder point in units for kabelo business

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Reference no: EM131588427

Kabelo started a new business. He sells second hand university books near Unisa Sunnyside campus. He is optimistic and expects sales to generate R1 500 000 next year. Each book is sold at R120 and the variable costs associated with each sale are expected to be R90. The total cost of placing an order with his supplier is estimated to be R6 000 per order.

The suppliers take about 15 days to deliver new stock. It costs the business R400 to carry one unit of stock per year. Estimated fixed costs for the next stock amounts to R70 000.

1. Calculate the economic order quantity for Kabelo’ business

2. Calculate the reorder point in units for Kabelo’ business

3. Calculate the breakeven point in Rand for Kabelo’ business

4. Calculate the degree of operating leverage for Kabelo’ business using the information given (use his expected sales)

Reference no: EM131588427

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