Globe Inc.is a distributor of DVDs.DVD Mart is a local retail outlet which sells blank and recorded DVDs.DVD Mart purchases DVDs from Globe at $25.00 per DVD;DVDs are shipped in packages of 63.Globe pays all incoming freight,and DVD Mart does not inspect the DVDs due to Globe's reputation for high quality.Annual demand is 314,000 DVDs at a rate of 6600 DVDs per week.DVD Mart earns 15% on its cash investments.The purchase-order lead time is one week.The following cost data are available:

What are the annual relevant ordering costs?
A)$91,977
B)$11,949
C)$8449
D)$8353

Question

Globe Inc.is a distributor of DVDs.DVD Mart is a local retail outlet which sells blank and recorded DVDs.DVD Mart purchases DVDs from Globe at $25.00 per DVD;DVDs are shipped in packages of 63.Globe pays all incoming freight,and DVD Mart does not inspect the DVDs due to Globe's reputation for high quality.Annual demand is 314,000 DVDs at a rate of 6600 DVDs per week.DVD Mart earns 15% on its cash investments.The purchase-order lead time is one week.The following cost data are available:

What are the annual relevant ordering costs?

What are the annual relevant ordering costs?
A)$91,977 
B)$11,949 
C)$8449 
D)$8353

Quizplus · Accepted Answer

EOQ =
 11ea8a5a_a00d_a5c6_a19c_d96d7815be1f_TB5540_00_TB5540_00_TB5540_00 EOQ = 69.90 packages
Annual relevant ordering costs = [(314,000 / 63)× $118.50] / 69.90 = $8449

Globe IncIs a Distributor of DVDs