Using the fixed-order-quantity model, what is the total ordering cost of inventory given an annual demand of 36,000 units, a cost per order of $40, and a holding cost per unit per year of $45?
Fill in the blank(s) with the appropriate word(s).
$5,692
Using Equation 20.3, Q = Square root [(2 × Demand × Order cost)/Holding cost] = Square root [(2 × 36,000 × 40)/45] = Square root (64,000) = 252.98. Dividing annual demand by Q, 36,000/252.98 = 142.3 orders per year × $40 per order = $5,692 ordering cost per year.
(*Note to instructors: The answer given here is correct. If, however, your student rounds 142.3 orders per year to 142 orders, the answer is $5,680. We are inclined to accept either answer.)
You might also like to view...
All of the following characterize a small group EXCEPT
a. a limited number of people. b. communication over a period of time. c. communication through electronic media. d. accomplishing specific goals.
__________ is a process used mainly in the area of public international law whereby a third party, often a disinterested government, brings the parties together by establishing communication and providing a site where the parties can meet, often in secret
a. Public involvement b. Good offices c. International involvement d. Best transactions
An exculpatory clause in an employment contract is usually enforceable.
Answer the following statement true (T) or false (F)
Johnson's Diner has an adjusted WACC of 10.08%. The company has a capital structure consisting of 70% equity and 30% debt, a cost of equity of 12.00%, a before-tax cost of debt of 8.00%, and a tax rate of 30%
Johnson is considering expanding by building a new diner in a distant city and considers the project to be riskier than his current operation. He estimates his existing beta to be 1.0, the required return on the market portfolio to be 12.00%, the risk-free rate to be 3.00%, and the beta for the new project to be 1.40. Given this information, and assuming the cost of debt will not change if Johnson undertakes the new project, what adjusted WACC should he use in his decision-making? A) 10.08% B) 12.60% C) 13.32% D) 14.16%