Tall Trees Incorporated is a distributor of swings.Toys'n'Tots is a local retail outlet which sells swings.Toys'n'Tots purchases the swings from Tall Trees Incorporated at $.80 per swing;the swings are shipped in cartons of 60.Tall Trees Incorporated pays all incoming freight,and Toys'n'Tots does not inspect the swings due to Tall Trees' reputation for high quality.Annual demand is 175,600 swings at a rate of 5,300 swings per week.The company earns 14% on its investments.The managerial accountant provided the following cost data:

If Toys'n'Tots makes an order (1/12 of annual demand)once per month,what are the relevant total costs?

Question

Tall Trees Incorporated is a distributor of swings.Toys'n'Tots is a local retail outlet which sells swings.Toys'n'Tots purchases the swings from Tall Trees Incorporated at $.80 per swing;the swings are shipped in cartons of 60.Tall Trees Incorporated pays all incoming freight,and Toys'n'Tots does not inspect the swings due to Tall Trees' reputation for high quality.Annual demand is 175,600 swings at a rate of 5,300 swings per week.The company earns 14% on its investments.The managerial accountant provided the following cost data:

If Toys'n'Tots makes an order (1/12 of annual demand) once per month,what are the relevant total costs?

If Toys'n'Tots makes an order (1/12 of annual demand)once per month,what are the relevant total costs?

Quizplus · Accepted Answer

B)Order Quantity = 175,600 Annual Demand / 12 = 14,633.33/60= 243.88 or 244 swings/month
229.2 swings per month
Carrying Cost per carton = ($.80 × 60 × 14%)+ $1.25 = $7.97
RTC = [(14 × $150)+ ((243.88/2)× $7.97)] = $4,584.78
= [(2100 + 121.94)= (2221.94 × 7.97)] =$17,708.86

Tall Trees Incorporated Is a Distributor of Swings