The Timberline ﬁrm expects a total need of €12,500 over the next 3 months.They have a beginning cash balance of €1,500, and cash is replenished when it hits zero.The ﬁxed cost of selling
Securities to replenish cash balances is €3.50.The interest rate on marketable securities is 8% per
Annum.There is a constant rate of cash disbursement and no cash receipts during the month.
What is the total ﬁxed order cost for the next three months based on the ﬁrm's current practice?

Question

Quizplus · Accepted Answer

The total fixed order cost for the next three months is €29.17. This is because the firm will need to replenish its cash balance three times, and each time it does so, it will incur a fixed cost of €3.50.

The Timberline ﬁRm Expects a Total Need of €12,500 Over