21. D&F; reports annual sales of $20 million, cost of goods sold of S10 million,

Question

21. D&F; reports annual sales of $20 million, cost of goods sold of S10 million, inventory of $5 million, and net income of S1 million. What is D&F;'s monthly inventory turns and month-of-supply? 22. Company C&A; sells 600 bottles of a dietary supplement per week at S100 per bottle. The supplement is ordered from a supplier who charges Company C&A; $30 per order and $50 per bottle. Company C&A;'s annual holding cost percentage is 40%. Assume Company C&A; operates 50 weeks in a year. What is Company C&A;'s total ordering and holding cost per year if the order quantity is 200?

Explanation / Answer

1. Total ordering cost = (D/Q)S

Here, D = 600*50 ; Q = 200 ; S = 30

Hence,
Total ordering cost = $4500

2. Total Holding cost per year = (Q/2)H

here, Q = 200 ; H = 40% of $50 i.e. = 0.4*50

Hence,
Total holding cost per year = $2000

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