Answer the following questions using the information below:
The Katoomba Furniture company produces a specialty dining table,and has the following information available concerning its inventory items:
$\begin{array}{ll}
\text { Relevant ordering costs per purchase order } & \$ 250 \
\text { Relevant carrying costs per year: } & \
\text { Required annual return on investment } & 10 \% \
\text { Required other costs per year } & \$ 14.00
\end{array}$
Annual demand is 1000 tables per year.The purchase price per table is $1600.
-What are the relevant total costs at the economic order quantity (EOQ)?
A)$3500
B)$1000
C)$9328
D)$1500

Question

Answer the following questions using the information below:
The Katoomba Furniture company produces a specialty dining table,and has the following information available concerning its inventory items:
 $\begin{array}{ll}
\text { Relevant ordering costs per purchase order } & \$ 250 \
\text { Relevant carrying costs per year: } & \
\text { Required annual return on investment } & 10 \% \
\text { Required other costs per year } & \$ 14.00
\end{array}$
 Annual demand is 1000 tables per year.The purchase price per table is $1600.
-What are the relevant total costs at the economic order quantity (EOQ)?
A)$3500
B)$1000
C)$9328
D)$1500

Quizplus · Accepted Answer

To determine the relevant total costs, we need to calculate the EOQ. Using the EOQ formula, we get:

EOQ = sqrt((2 x demand x setup cost) / holding cost per unit)
EOQ = sqrt((2 x 1000 x $350) / $40)
EOQ = 33.17 or 33 tables (rounded)

The relevant total costs at the EOQ will include:
- Ordering costs: (1000 / 33) x $350 = $10,606.06
- Holding costs: 33 / 2 x $40 = $660
- Purchase costs: 33 x $1600 = $52,800

Total relevant costs = $10,606.06 + $660 + $52,800 = $63,066.06

Therefore, the best choice for the Katoomba Furniture company would be to order 33 tables at a time to minimize total costs.

Answer the Following Questions Using the Information Below: the Katoomba

Answer the Following Questions Using the Information Below:
the Katoomba