Short Grass Incorporated is a distributor of golf balls. Martin's Golf Supplies is a local retail outlet which sells golf balls. Martin's purchases the golf balls from Short Grass Incorporated at $0.95 per ball; the golf balls are shipped in cartons of 72. Short Grass Incorporated pays all incoming freight, and Martin's Golf Supplies does not inspect the balls due to Short Grass' reputation for high quality. Annual demand is 162,520 golf balls at a rate of 3591 balls per week. Martin's Golf Supplies earns 12% on its cash investments. The purchase-order lead time is one week. The following cost data are available:

Purchasing at the EOQ recommended level, what are the relevant total costs? (Round costs to the nearest cent and quantities to the nearest whole number. Your answer might be slightly different from the best answer due to rounding.)
A) $1584
B) $2313
C) $1157
D) $3168

Question

Short Grass Incorporated is a distributor of golf balls. Martin's Golf Supplies is a local retail outlet which sells golf balls. Martin's purchases the golf balls from Short Grass Incorporated at $0.95 per ball; the golf balls are shipped in cartons of 72. Short Grass Incorporated pays all incoming freight, and Martin's Golf Supplies does not inspect the balls due to Short Grass' reputation for high quality. Annual demand is 162,520 golf balls at a rate of 3591 balls per week. Martin's Golf Supplies earns 12% on its cash investments. The purchase-order lead time is one week. The following cost data are available:

Purchasing at the EOQ recommended level, what are the relevant total costs? (Round costs to the nearest cent and quantities to the nearest whole number. Your answer might be slightly different from the best answer due to rounding.)

Purchasing at the EOQ recommended level, what are the relevant total costs? (Round costs to the nearest cent and quantities to the nearest whole number. Your answer might be slightly different from the best answer due to rounding.)
A) $1584 
B) $2313 
C) $1157 
D) $3168

Quizplus · Accepted Answer

Annual Demand / 162,520 / 72 = 2257 cartons
Carrying Cost per carton = ($0.95 × 72 × 12%) + $0.77 = $8.98
EOQ =
 11ea1398_f0ea_fcda_a1e4_1587055036a4_TB3027_11 
EOQ = 257.6 cartons - round to 258
RTC = 11ea1398_f0ea_fcdb_a1e4_4dcde18dee2c_TB3027_11 + 11ea1398_f0ea_fcdc_a1e4_f7f3e9c17187_TB3027_11 = $2313
(Your solution might be slightly different based on rounding.)

Short Grass Incorporated Is a Distributor of Golf Balls