Office Supply House purchases 4,160 reams of paper per year, ordered in lots of
ID: 2432136 • Letter: O
Question
Office Supply House purchases 4,160 reams of paper per year, ordered in lots of 80 reams per week at $150 per ream The vendor covers all shipping costs. Office Supply House is not required to inspect the shipment upon entry. Office Supply House earns 20% on its cash investments. The purchase order lead time is two weeks. The following cost data are available: Relevant ordering costs per purchase order $53.75 akage, and so on, per year S4.25 What are the total relevant costs assuming the quantity ordered equals 80 reams? $3,91365 $3,948.50 $4,075.25 $4,165.00Explanation / Answer
Answer 1
Opportunity cost OC = $30 Per Ream Per Year. ($150 ?20%)
Annual Demand
D
= 4160 Reams
Ordering Cost
O
= $ 53.75 Per Purchase Order
Carrying Cost
C
= $ 34.25 Per Ream Per Year ($30+$4.25)
Relevant Costs Assuming The Quantity Ordered Equals 80 Reams :-
Ordering Cost= Annual Demand/Qty. Per Purchase Order * Ordering Cost Per Purchase Order
= 4160 / 80 * $ 53.75 = $ 2795
Carrying Cost= Qty. Per Purchase Order/2 * Carrying Cost Per Ream Per Year
= 80 / 2 * $ 34.25 = $ 1370
Total Inventory Cost= Oredering Cost + Carrying Cost
= $ 2795 + $ 1370
= $ 4165
Answer 2
A system that comprises a single database that collects data and feeds it into software applications supporting all of a company's business activities is known as a(n):
B) Enterprise Requirements Planning (ERP) system
Annual Demand
D
= 4160 Reams
Ordering Cost
O
= $ 53.75 Per Purchase Order
Carrying Cost
C
= $ 34.25 Per Ream Per Year ($30+$4.25)
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