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Onxy Onxy
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6 years ago
Flash is a distributor of flash drives. Office Mart is a local retail outlet which sells flash drives. Office Mart purchases from Office, Inc. at $0.80 per flash drive; and, the flash drives are shipped in packages of 30. Office, Inc. pays for all incoming freight, and Office Mart does not inspect the flash drives due to Office, Inc.'s reputation for high quality. Annual demand is 160,000 flash drives at a rate of 2,800 flash drives per week. Office Mart earns 12% on its cash investments. The purchase-order lead time is one week. The following costs are available:

Relevant ordering costs per purchase order   $116.00
Carrying costs per package per year:
Relevant insurance, materials handling,
breakage, etc., per year   $.80

Required
If Office Mart makes an order (1/12 of annual demand) once per month, what are the relevant total costs?
A) $5,593.60
B) $5.683.42
C) $6,284.68
D) $6,486.52
E) $7,286.59
Textbook 
Managerial Accounting: Decision Making and Motivating Performance

Managerial Accounting: Decision Making and Motivating Performance


Edition: 1st
Authors:
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lordingtonlordington
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More solutions for this book are available here
A
Explanation:  A) Order Quantity = Annual Demand / 12 = 160,000 / 12 = 1,333.33 / 52 = 256.41, or 256 disks per month
RTC = Ordering Costs + Carrying Costs
Carrying Cost per carton = [($0.80 × 30 × 12%) + $.80] = $3.68
RTC = (12 × $116) + (256/2) × $3.68] = 323.68
[(1392 + 128) × $3.68] = $5,593.60
1

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Onxy Author
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6 years ago
Thanks for your help!!
gage
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This helped my grade so much Perfect
einstein
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this is exactly what I needed
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