If he were to order 16 cases of Stein beer at a time, what would be the daily total inventory costs, EXCLUDING the cost of the beer?
A)$2.00
B)$4.00
C)$1.28
D)$3.28
E)$2.56

Question

Quizplus · Accepted Answer

The daily total inventory cost can be calculated as follows:

1. Calculate the holding cost per case:
$0.32/case * 25% (holding cost rate) = $0.08/case

2. Calculate the order cost per order:
$20/order / 16 cases/order = $1.25/case

3. Calculate the daily total inventory cost:
16 cases/order * 365 days/year = 5,840 cases/year 
5,840 cases/year / 365 days/year = 16 cases/day

Total inventory cost per day = (holding cost per case + order cost per case) x number of cases ordered per day 
= ($0.08/case +$1.25/case) x 16 cases/day 
= $1.28/day

Therefore, the answer is C, $1.28.

If He Were to Order 16 Cases of Stein Beer