AL-FAIDA Ltd is a retail company operating within the TIJANIYA enclave. AL-FAIDA hAL-FAIDA Ltd is a retail company operating within the TIJANIYA enclave. AL-FAIDA has been reviewing the adequacy of its stock control systems. During a period of such review, three products were identified for further investigations. The table below sets out the details relevant to the three products.

Product Type

Units in store

(000)

Price per unit in store

(GHS)

Min. weekly sales in GHS

(000)

Normal weekly sales in GHS (000)

Max. weekly sales in GHS

(000)

Fez

25

2.25

26

28

30

Khaolack

500

0.36

130

143

160

Samgoon

250

0.87

60

96

128

Gross margin is expressed as a % of sales and given as follows for each product:

Fez = 42; Khaolack = 46; Samgoon = 37.

Gross margin = sales – purchase price of product.

Outstanding order: Samgoon - order for 250,000 units placed 2 trading days ago. There are 6 trading days per week. All orders are delivered by suppliers into the central warehouse. The lead time is one week from the time order is placed. A further week is required by the retailer in order to transfer stock from central warehouse to stores. Both of these lead times can be relied upon.

Required to:

Calculate for each product:

the minimum and maximum weekly sales units (10 marks)
the stock re-order level (10 marks)
the maximum stock control level (10 marks)
Show all workings.

Marks allotted for workings (20 marks)

Expert Answer
as been reviewing the adequacy of its stock control systems. During a period of such review, three products were identified for further investigations. The table below sets out the details relevant to the three products.

Product Type

Units in store

(000)

Price per unit in store

(GHS)

Min. weekly sales in GHS

(000)

Normal weekly sales in GHS (000)

Max. weekly sales in GHS

(000)

Fez

25

2.25

26

28

30

Khaolack

500

0.36

130

143

160

Samgoon

250

0.87

60

96

128

Gross margin is expressed as a % of sales and given as follows for each product:

Fez = 42; Khaolack = 46; Samgoon = 37.

Gross margin = sales – purchase price of product.

Outstanding order: Samgoon - order for 250,000 units placed 2 trading days ago. There are 6 trading days per week. All orders are delivered by suppliers into the central warehouse. The lead time is one week from the time order is placed. A further week is required by the retailer in order to transfer stock from central warehouse to stores. Both of these lead times can be relied upon.

Required to:

Calculate for each product:

the minimum and maximum weekly sales units
the stock re-order level
the maximum stock control level
Show all workings.