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 $28.00 per DVD;DVDs are shipped in packages of 68.Globe pays all incoming freight,and DVD Mart does not inspect the DVDs due to Globe's reputation for high quality.Annual demand is 321,000 DVDs at a rate of 6100 DVDs per week.DVD Mart earns 11% on its cash investments.The purchase-order lead time is one week.The following cost data are available:

What are the relevant total costs?
A)$18,758
B)$84,917
C)$15,471
D)$13,124

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 $28.00 per DVD;DVDs are shipped in packages of 68.Globe pays all incoming freight,and DVD Mart does not inspect the DVDs due to Globe's reputation for high quality.Annual demand is 321,000 DVDs at a rate of 6100 DVDs per week.DVD Mart earns 11% on its cash investments.The purchase-order lead time is one week.The following cost data are available:

What are the relevant total costs?

What are the relevant total costs?
A)$18,758 
B)$84,917 
C)$15,471 
D)$13,124

Quizplus · Accepted Answer

EOQ =
 11ea8a5a_a00e_de4b_a19c_71c5c1036a38_TB5540_00_TB5540_00_TB5540_00 EOQ = 72.31 packages
Annual relevant carrying costs = = $7735.00
 11ea8a5a_a00f_055c_a19c_89bc7420fe3e_TB5540_00_TB5540_00_TB5540_00 Annual relevant ordering costs = [(321,000 / 68)× $118.50] / 72.31 = $7735.99
Relevant total costs = $7735.00 + $7736 = $15,471

Globe IncIs a Distributor of DVDs