Very Technical is a firm that sells computing equipment. It costs Very Technical $125 for each order of computer monitors and the variable cost of placing an order is $10 per monitor. Very Technical pays an annual holding cost of $20 per monitor. If Very Technical sells 8,000 computer monitors a year and they order 1,000 monitors, what is the total annual cost of the monitors?
A)$91,000
B)$59,500
C)$101,000
D)$87,500

Question

Quizplus · Accepted Answer

The total annual cost includes the purchase cost, ordering cost, and holding cost. Purchase cost = $125 * 8,000 = $1,000,000. Ordering cost = ($125/order) * (8,000 monitors / 1,000 monitors/order) = $1,000. Holding cost = ($20/monitor) * (1,000 monitors / 2) = $10,000. Total annual cost = $1,000,000 + $1,000 + $10,000 = $1,011,000. However, the calculation provided in the question seems to have an error in interpreting the costs, as the given options do not match the calculated total annual cost. Re-evaluating with the correct interpretation: Purchase cost is not explicitly given per monitor, but the cost to order monitors is $125 each, leading to a misunderstanding in the calculation. The correct approach is to calculate the ordering and holding costs based on the given data: Ordering cost = $10 * (8,000 / 1,000) = $80. Holding cost = $20 * (1,000 / 2) = $10,000. However, this approach also does not align with the provided options, indicating a misunderstanding in the prompt's interpretation. Given the options and the typical formula for total cost in inventory management (Total Cost = Purchase Cost + Ordering Cost + Holding Cost), and assuming the purchase cost is correctly interpreted as part of the initial $125 per monitor, the correct calculation should consider the cost per monitor, the number of orders, and the average holding cost: Total annual cost = (Cost per monitor * Quantity sold) + (Ordering cost * Number of orders) + (Holding cost * Average inventory). Without clear purchase cost per monitor beyond the initial order cost, we directly address the provided options for an educational guess based on standard inventory cost calculations.

Very Technical Is a Firm That Sells Computing Equipment