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Chapter 3: 14BP_d (page 222)

In the second year, Fisk Corporation finds that it can reduce ordering costs to \(2 per order but that carrying costs stay the same at \)1.60 per unit. Also, volume remains at 49,000 units per year.

d. What is the total cost of ordering and carrying inventory?

Short Answer

Expert verified

The total cost of ordering and carrying inventory is $560.

Step by step solution

01

Ordering cost of inventory

The ordering cost is $280.

Orderingcost=Numberoforders脳Costperorder=140脳$2=$280

02

Carrying cost of inventory

The carrying cost is $280.

Carryingcost=Averageinventory脳Carryingcostperunit=175脳$1.60=$280

03

Carrying cost of inventory

The total carrying and ordering cost is $560.

Totalcost=Carryingcost+Orderingcost=$280+$280=$560

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Most popular questions from this chapter

Esquire Products Inc. expects the following monthly sales:

January

\(28,000

February

\)19,000

March

\(12,000

April

\)14,000

May

\(8,000

June

\)6,000

July

\(22,000

August

\)26,000

September

\(29,000

October

\)34,000

November

\(42,000

December

\)24,000

Total annual sales

\(264,000

Cash sales are 40 percent in a given month, with the remainder going into accounts receivable. All receivables are collected in the month following the sale. Esquire sells all of its goods for \)2 each and produces them for \(1 each. Esquire uses level production, and average monthly production is equal to annual production divided by 12.

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What does the term structure of interest rates indicate?

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