Very Technical is a firm that sells computing equipment. It costs Very Technical $40 for each order of computer monitors and the variable cost of placing an order is $5 per monitor. If Very Technical sells 2,000 computer monitors a year and they order 50 monitors, what is the annual ordering cost of the monitors?
A)$87,500
B)$122,500
C)$116,000
D)$95,500

Question

Quizplus · Accepted Answer

First, we need to find out how many orders are placed in a year:

2,000 monitors / 50 monitors per order = 40 orders per year

Now we can use the following formula to find the total annual ordering cost:

Total Ordering Cost = Order Cost per Order * Number of Orders per Year

The order cost per order is the sum of the fixed cost and the variable cost:

Order Cost per Order = Fixed Cost + (Variable Cost per Unit * Number of Units)

Fixed Cost = $40 
Variable Cost per Unit = $5 
Number of Units = 50

Order Cost per Order = $40 + ($5 * 50) = $290

Total Ordering Cost = $290 * 40 = $11,600

Therefore, the annual ordering cost of the monitors is $116,000.

Very Technical Is a Firm That Sells Computing Equipment