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What is the optimal cash conversion size

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Q1. The following data refer to various annual costs relating to the inventory of a single-product company:

Unit transportation-in on purchases is P0.20

Storage per unit is 0.12

Insurance per unit is 0.10

Annual interest foregone from alternate investment of funds is P800

Annual number of units required is10,000

What is the annual carrying cost per unit?

Q2. ABC Company has a total annual cash requirement of P9,075,000 which are to be paid uniformly. It has the opportunity to invest the money at 24% per annum. The company spends, on the average, P40 for every cash conversion to marketable securities. What is the optimal cash conversion size?

Reference no: EM133186296

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