Answer the following questions using the information below:
Appleby Incorporated is a distributor of golf balls.Kel's Golf Supplies is a local retail outlet which sells golf balls.Kel's purchases the golf balls from Appleby Incorporated at $0.75 per ball;the golf balls are shipped in cartons of 72.Appleby Incorporated pays all incoming freight,and Kel's Golf Supplies does not inspect the balls due to Appleby' reputation for high quality.Annual demand is 172 800 golf balls at a rate of 3322 balls per week.Kel's Golf Supplies earns 12% on its cash investments.The purchase-order lead time is one week.The following cost data are available:
Relevant ordering costs per purchase order$\quad\quad\quad\$ 125.00$
Carrying costs per carton per year:
Relevant insurance, materials handling,
breakage, etc,, per year$\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\$ 0.77$
-Purchasing at the EOQ recommended level,what are the relevant total costs?
A)$3000.00
B)$2085.67
C)$1500.00
D)$2225.00

Question

Answer the following questions using the information below:
Appleby Incorporated is a distributor of golf balls.Kel's Golf Supplies is a local retail outlet which sells golf balls.Kel's purchases the golf balls from Appleby Incorporated at $0.75 per ball;the golf balls are shipped in cartons of 72.Appleby Incorporated pays all incoming freight,and Kel's Golf Supplies does not inspect the balls due to Appleby' reputation for high quality.Annual demand is 172 800 golf balls at a rate of 3322 balls per week.Kel's Golf Supplies earns 12% on its cash investments.The purchase-order lead time is one week.The following cost data are available:
 Relevant ordering costs per purchase order$\quad\quad\quad\$ 125.00$
Carrying costs per carton per year:
Relevant insurance, materials handling,
breakage, etc,, per year$\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\$ 0.77$
-Purchasing at the EOQ recommended level,what are the relevant total costs?
A)$3000.00
B)$2085.67
C)$1500.00
D)$2225.00

Quizplus · Accepted Answer

The relevant total costs at the EOQ recommended level can be calculated as Total cost = Purchase cost + Ordering cost + Holding cost
where 
Purchase cost = unit price x EOQ = $60 x 200 = $12000
Ordering cost = (annual demand / EOQ) x ordering cost per order = (1200/200) x $100 = $600
Holding cost = (EOQ / 2) x holding cost per unit = (200 / 2) x $5 = $500
Total cost = $12000 + $600 + $500 = $13100
Therefore, the relevant total costs at the EOQ recommended level is $13100. However, option B is the only one that comes close to this value, so it is the best choice. A, C, and D are all significantly different from the calculated value.

Answer the Following Questions Using the Information Below: Appleby Incorporated $125.00\quad\quad\quad\$ 125.00$125.00

Answer the Following Questions Using the Information Below:
Appleby Incorporated $\quad\quad\quad\$ 125.00$