30. Sarah’s computer Citysells 5,000 boxes of CD-RW compact discs per year. Shed

Question

30.       Sarah’s computer Citysells 5,000 boxes of CD-RW compact discs per year. Shedetermined that she pays $50 to process an order for discs. Her purchase price is $6 for each box of discs and she hasdetermined that storage costs for one year are 25 percent of thepurchase price. What is her approximate total orderingcost?

(a)               $865.

(b)              $611.

(c)               $433.

(d)              $87.

(e)               $43.

48. You own arestaurant and just negotiated a decrease in the cost of steaks by25 cents a steak. You normally sell 300,000 steak dinners ayear. Your business pays an average of 30 percent in incometaxes. What is the annual tax cost of this increasedefficiency?

(a)               $22,500.

(b)              $52,500.

(c)               $75,000.

(d)              $210,000.

44.     Capital budgeting investments arefeasible if, after capital budgeting analysis, the:

(a)               Present value of the benefits > the present value of thecosts.

(b)              Present value of the costs > the present value of thebenefits.

(c)               Present value of the costs < the present value of thebenefits.

(d)              Both (a) and (c) above.

(e)               Both (a) and (b) above.

Explanation / Answer

c

a

d

30

c

433 Hint : Assume she orders the lots in EOQ. Determine the number of orders required. Calculate ordering Cost. 48

a

22500 Hint : 300,000 * 0.25 *0.30 44

d

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