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 total relevant costs,assuming the quantity ordered equals 50 units?
A)$4000
B)$3500
C)$5000
D)$9350

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 total relevant costs,assuming the quantity ordered equals 50 units?
A)$4000
B)$3500
C)$5000
D)$9350

Quizplus · Accepted Answer

The total relevant costs include ordering costs and carrying costs. Ordering costs = (Annual demand / Order quantity) * Ordering cost per order = (1000 / 50) * $250 = $5000. Carrying costs = (Order quantity / 2) * (Purchase price per unit * Annual return + Other costs) = (50 / 2) * ($1600 * 0.10 + $14) = $4350. Total relevant costs = $5000 + $4350 = $9350.

Answer the Following Questions Using the Information Below: the Katoomba

Answer the Following Questions Using the Information Below:
the Katoomba