The Flowering Vine buys hanging plants for $2 each and resells them for $8.95 each.The firm sells 3500 plants per year.Generally,the firm orders 400 plants at a time and has a fixed cost per order of $28.The carrying cost per unit is $1.16.To avoid newer plants mixing with older plants,the inventory is totally sold out before it is restocked.The total annual carrying cost is ____ and the total annual restocking cost is _____.

Question

Quizplus · Accepted Answer

The total annual carrying cost is calculated as (average inventory) x (carrying cost per unit) = (400/2) x $1.16 = $232. The total annual restocking cost is calculated as (number of orders per year) x (fixed cost per order) = (3500/400) x $28 = $245.

The Flowering Vine Buys Hanging Plants for $2 Each and Resells