Sarah's Computer City sells 5,000 boxes of CD- RW compact discs per year.She determined that she pays $50 to process an order for discs.Her purchase price is $6 for each box of discs and she has determined that storage costs for one year are 25 percent of the purchase price.Sarah's vendor said that if she purchased 1,000 boxes at a time,she would receive a 10 percent discount.The total cost formula is TC = DP +^QIP+^DS.
2 Q
What is Sarah's annual carrying cost if she does not take advantage of the discount?

Question

Quizplus · Accepted Answer

The annual carrying cost is 25% of the purchase price, which is $6 per box.  Therefore, the annual carrying cost is $6 * 5,000 * 0.25 = $750.  However, since Sarah does not take advantage of the discount, she pays $6 per box instead of $5.40 per box.  Therefore, the annual carrying cost is $6 * 5,000 * 0.25 = $433.

Sarah's Computer City Sells 5,000 Boxes of CD- RW Compact