Answer:
Annual saving = 6460
Explanation:
Below is the calculations:
Future value of amount = $1000000
He starts saving at 25 years, then the Years of saving = 40.
Let the interest earned on the saving account = 6%
Thus annual saving = 1000000(F/A, 6%, 40)
Annual saving = 1000000(0.00646)
Annual saving = 6460
Therefore the annual saving will be 6460 dollars.
Operating Leverage Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $1,250,000 $2,000,000 Variable costs (750,000) (1,250,000) Contribution margin $500,000 $750,000 Fixed costs (400,000) (450,000) Operating income $100,000 $300,000 a. Compute the operating leverage for Beck Inc. and Bryant Inc. If required, round to one decimal place. Beck Inc. fill in the blank 1 Bryant Inc. fill in the blank 2 b. How much would operating income increase for each company if the sales of each increased by 20%? Dollars Percentage Beck Inc. $fill in the blank 3 fill in the blank 4 % Bryant Inc. $fill in the blank 5 fill in the blank 6 % c. The difference in the of operating income is due to the
Answer:
1. Operating leverage = Contribution margin / Net income
Beck Inc.
Operating leverage = $500,000 / $100,000
Operating leverage = 5
Bryant Inc.
Operating leverage = $750,000 / $300,000
Operating leverage = 2.5
2. Income from operations increase = Increase in sales * Degree of operating leverage
Dollar increase = Net income * Percentage
Beck Inc.
Percentage = 5*20 = 100% (Income from operations increase)
Dollar increase = $100,000 * 100% = $100,000
Bryant Inc.
Percentage = 2.5*20 = 50% (Income from operations increase)
Dollar increase = $300,000 * 50% = $150,000
Item 2 On July 1 of the current calendar year, Plum Co. paid $8,000 cash for management services to be performed over a two-year period beginning July 1. Plum follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The adjusting entry on December 31 of the current year for Plum would include:
Answer:
- July 1st - December 31st (6 months)
- Here, $8,000 is paid for 2 years (24 months)
So, expenses for 6 month = $8,000 * 6/24 = $2,000
Date Journal Entry Debit Credit
Expense $2,000
Prepaid expense $2,000
(To record the expense)
Travis and Andrea were divorced in 2017. Their only marital property consisted of a personal residence (fair market value of $400,000, cost of $200,000), and publicly traded stocks (fair market value of $800,000, cost basis of $500,000). Under the terms of the divorce agreement, Andrea received the personal residence and Travis received the stocks. In addition, Andrea was to receive $50,000 for eight years. I. If the $50,000 annual payments are to be made to Andrea or her estate (if she dies before the end of the eight years), the payments will qualify as alimony. II. Andrea has a taxable gain from an exchange of her one-half interest in the stocks for Travis' one-half interest in the house and cash. III. If Travis sells the stocks for $900,000, he must recognize a $400,000 gain. a.I, II, and III are true. b.Only III is true. c.Only I and II are true. d.Only I and III are true.
Answer: B. b.Only III is true.
Explanation:
It should be noted that in order to qualify as an alimony, then the cash payments have to stop when the payer dies.
It should be noted that the $50,000 annual payments that are to be made to Andrea or her estate if she dies before the end of the eight years doesn't qualify as alimony.
Therefore, the correct option will be that If Travis sells the stocks for $900,000, he must recognize a $400,000 gain.
Therefore, only III is correct.
Based upon the following data for a business with a periodic inventory system, determine the cost of merchandise sold for August. Merchandise inventory, August 1 $ 96,610 Merchandise inventory, August 31 100,530 Purchases 254,660 Purchases returns and allowances 13,340 Purchases discounts 6,320 Freight in 4,070Cost of Merchandise Sold for August = ______.
Answer:
Cost of merchandise = $235150
Explanation:
Below is the calculations:
Cost of merchandise = Opening inventory - ending inventory + purchases - purchase return - purchase discount + freight
Now plug the value in the above formula:
Cost of merchandise = 96610 - 100530 + 254660 - 13340 - 6320 +4070
Cost of merchandise = $235150
Grace Company gathered the following reconciling information in preparing its July bank reconciliation: Cash balance per books, 7/31 $4,500 Deposits in transit 150 Notes receivable and interest collected by bank 850 Bank charge for check printing 20 Outstanding checks 2,000 NSF check 170 The adjusted cash balance per the books on July 31 is____.a. $5,010.
b. $3,310.
c. $3,460.
d. $5,160.
Answer:
d. $5,160
Explanation:
Calculation to determine what The adjusted cash balance per the books on July 31 is
Cash balance per books, 7/31 $4,500
Add Notes receivable and interest collected by bank $850
Less Bank charge for check printing ($20)
Less NSF check ($170)
Cash balance per the books on July 31 $5,160
Therefore The adjusted cash balance per the books on July 31 is $5,160
A convertible preferred stock is convertible at $10, pays a 4% annual dividend, is callable at $110, and is trading at a current market price of $116. Based on these details, what is the parity price of the common stock
Answer:
$11.60
Explanation:
In ascertaining the parity price of the common stock, we need to ascertain the conversion ratio which is the par price of the preferred stock divided by the convertible price
The par value of the preferred stock=$100(since call price is $110)
convertible price=$10
conversion ratio=$100/$10=10
The parity price is the current market price of the preferred stock divided by the conversion ratio
Parity price=$116/10
Parity price=$11.60
who is the richest person in the world ?
Answer:
Jeffrey Preston Bezos
Explanation:
Jeffrey Preston Bezos is an American investor, business tycoon, media proprietor, and he is founder and executive chairman of Amazon. Although, he had served as the chief executive officer (CEO), president and chairman of Amazon before becoming its executive chairman.
He was born on the 12th of January, 1964 in Albuquerque, New Mexico, United States of America.
According to Forbes magazine, Jeff currently has an estimated net worth of two hundred and five (205) billion dollars, making him the richest man in the world and on Earth.
In conclusion, Jeffrey Preston Bezos is the richest person in the world.
You are a provider of portfolio insurance and are establishing a four-year program. The portfolio you manage is currently worth $150 million, and you promise to provide a minimum return of 0%. The equity portfolio has a standard deviation of 25% per year, and T-bills pay 7.5% per year. Assume that the portfolio pays no dividends.
Required:
a. What percentage of the portfolio should be placed in bills?
b. What percentage of the portfolio should be placed in equity?
Answer:
sorry but I don't know sorry
The following relates to a proposed equipment purchase: Cost $ 157,000 Salvage value $ 5,000 Estimated useful life 4 years Annual net cash flows $ 52,600 Depreciation method Straight-line Ignoring income taxes, the annual net income amount used to calculate the accounting rate of return is
Answer:
$14,850
Explanation:
Depreciable amount = $158,000 - $5,000 = $153,000
Annual depreciation = $38,250
Annual net income = $53,100 - $38,250 = $14,850.
Therefore, the annual net income amount used to calculate the accounting rate of return is $14,850
The Marketing Dept. needs to maximize consumer interest in the company's new financial services by sending marketing emails, targeted ads, and texts at prescribed intervals throughout the initial process of attracting and building a relationship with a customer. Riad's team has a large amount of data from previous marketing campaigns that they can analyze to develop a recommended schedule, taking into account a large variety of factors about different types of customers. What kind of technique will this task force need to employ in order to make these recommendations?
Answer:
Simulation
Explanation:
From the question we are informed about The Marketing Dept. Which needs to maximize consumer interest in the company's new financial services by sending marketing emails, targeted ads, and texts at prescribed intervals throughout the initial process of attracting and building a relationship with a customer. Riad's team has a large amount of data from previous marketing campaigns that they can analyze to develop a recommended schedule, taking into account a large variety of factors about different types of customers. In this case, the kind of technique this task force will need to employ in order to make these recommendations is Simulation.
Simulation can be regarded as imitation of particular operation of a real-world process, real world system within some specific period of time. Most times computers can be used in Execution of the simulation. Simulation can be used in different aspects such as in marketing, education, performance tuning.
Assume that your company is considering switching to cloud computing for some of its services. Some people on the team are worried about security. What are some things that you can do to minimize the potential security disadvantages?
Answer:
See the explanation below.
Explanation:
Cloud computing can be described as the on-demand availability of computer system resources, particularly data storage and computational power, without the user having to manage them directly.
The potential security disadvantages of cloud computing can be minimized by doing the following:
a. Teach effective protection techniques to other members of the team and staff.
b. To ensure that internal and external data privacy regulations are followed, ensure that you in place the correct cloud application governance mechanism.
c. Make sure you have a backup plan in place. This ensures that you have a secure backup of your data in the event that something goes wrong.
d. To manage risk, implement access controls. Even for external identities, link user identities to backend folders.
e. Encrypt data and text before transmitting it, and store the keys that encrypt and decrypt it.
f. To keep hackers at bay, create unique, one-of-a-kind passwords.
g. Penetration testing should be employed to test your security measures. Penetration testing is an IT security practice that aims to find and fix flaws as well as reduce cloud security risks.
A moving average of stock prices _________________.A. always lies above the most recent priceB. always lies below the most recent priceC. is less volatile than the actual pricesD. is more volatile than the actual prices
Answer:
The correct option is C. is less volatile than the actual prices.
Explanation:
A moving average is a data-analysis approach that calculates the averages of distinct subsets of the complete data set. The purpose of determining a stock's moving average is to smooth out price data by creating an average price that is constantly updated.
Therefore, the moving average reduces the impact of random, short-term fluctuations on the price of a stock over a given time frame. This makes the moving average of stock prices be less volatile than the actual prices.
Therefore, the correct option is C. is less volatile than the actual prices.
Triathlon Cycles specializes in producing touring bicycles but has recently Activity Cost pool Mountain Bicycle Touring Bicycle Direct materials per unit $1,000 $2,200 Total direct labor cost $300 $700 Total manufacturing overhead $75,000 $180,000 Number of units 200 units 400 units1. What is the manufacturing overhead allocated to each mountain bicycle?2. What is the total manufacturing costs of one touring bicycle?
Answer:
$375 per mountain bicycle $3,350 per touring bicycleExplanation:
1. Manufacturing overhead of each mountain bicycle:
= Total manufacturing overheads for mountain bicycles / Number of units
= 75,000 / 200
= $375 per mountain bicycle
2. Manufacturing costs of one touring bicycle
= Direct labor + Direct material + Manufacturing overhead per touring bicycle
= 700 + 2,200 + (180,000 / 400 units of touring bicycles)
= 700 + 2,200 + 450
= $3,350
Kingbird, Inc. purchased a piece of equipment for $72,200. It estimated a 8-year life and a $3,400 salvage value. At the end of year four (before the depreciation adjustment), it estimated the new total life to be 10 years and the new salvage value to be $7,200.
Compute the revised depreciation assuming Kingbird uses the straight-line method.
Revised annual depreciation
$enter the revised annual depreciation in dollars
Depreciation Expense 3,060
Accumulated Depreciation 3,060
72,200-3,400=68,800/8yr=8,600*4yrs=34,400-72,200=37,800
37,800-7,200=30,600/10yr=3,060 annual depreciation
72,200-3,400=68,800/8yr
=8,600*4yrs
=34,400-72,200=37,800
37,800-7,200=30,600/10yr
=3,060 annual depreciation
Therefore, the Depreciation Expense of 3,060.
What is depreciation?Depreciation is a term used in accounting to describe two different aspects of the same idea: first, the actual decline in an asset's fair value as it is used and worn, such as the annual decline in value of factory equipment, and second, the allocation in accounting statements of the asset's original cost to the periods in which the asset is used (depreciation with the matching principle).
Depreciation is the process of reallocating, or "writing down," the cost of a physical item (such as equipment) over the course of that asset's useful life. It also refers to the decline in asset value. Long-term assets are depreciated by businesses for accounting and tax reasons. A company's or entity's balance sheet is impacted by the asset's decline in value, and the income statement they report is impacted by the process of depreciation from an accounting standpoint.
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Both IFRS and U.S. GAAP allow deferred taxes to be: presented as noncurrent on the balance sheet. measured using a substantially enacted tax rate. recognized in equity after a fixed asset revaluation.
Answer:
presented as noncurrent on the balance sheet.
Explanation:
GAAP is an acronym for Generally Accepted Accounting Principles, it was adopted by the U.S. Securities and Exchange Commission (SEC) and is the comprehensive accounting rules and standard used in recording and reporting financial information.
The IFRS is an acronym for International Financial Reporting Standards,International Financial Reporting Standards, it is a set of accounting rules that ensure financial statements are consistent, transparent and comparable globally.
Both IFRS and U.S. GAAP allow deferred taxes to be presented as noncurrent on the balance sheet.
Sal is very clear in defining for his subordinates the incentives available to them for different levels of performance. He makes sure they understand the path toward receiving incentives and follows through on rewarding them when they meet those goals. Sal exhibits the _______ theory of leadership.
Answer: d. path–goal
Explanation:
The Path-goal theory of leadership espouses that leaders should be dynamic and use whichever leadership style would be best suited to the abilities of their subordinates and the work environment that they are in.
It is then divided into four styles with the relevant style here being the "directive path-goal clarifying leader behavior". Under this style, the manager specifies exactly what it is that they want from the employees and then rewards them when they meet the required objectives.
The theory of leadership that Sal was exhibiting when he was defining some incentive that can make them perform well and explain the path to follow so as to receive the incentive when they achieve their goal is The path-goal theory.
The path-goal theory can be regarded as one that focus on leader's behavior which serves as contingent to the satisfaction that influence the motivation and performance of their employees. Good example us where Sal promise her employee about incentive once they achieve their goals.Therefore, The path-goal theory is correct.
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Grays Company uses a perpetual inventory system. On May 1, the company had inventory of 20 units at a cost of $8 each. On May 3, it purchased 30 units at $10 each. 22 units are sold on May 6. Under the weighted average inventory costing method, what amount will be reported as cost of goods sold for the 22 units that were sold
Answer: $9.20
Explanation:
Using the weighted average inventory costing method, the price is abased on the number of units and their price.
The above inventory cost would be calculated as follows:
= [ (Opening units * Cost of units) + (Units purchased * Cost of purchase) ] / Total units in inventory
= [ (20 * 8) + (30 * 10) ] / (20 units + 30 units)
= [ 160 + 300 ] / 50
= $9.20
The American Recovery and Reinvestment Act, signed by President Barack Obama in 2009, aimed at: Group of answer choices providing higher unemployment benefits to the residents of the economy. removing the supply bottlenecks in the economy. ensuring free trade flows across the world. stimulating the aggregate demand in the economy. closing an expansionary gap through a contractionary fiscal policy.
Answer: Stimulating the aggregate demand in the economy.
Explanation:
When former President Obama took over the governing of the nation in 2009, the country was in the midst of one of the worst global depressions that it had ever been through. Employment was high and aggregate demand was low.
President Obama therefore embarked on an expansionary fiscal policy by passing the American Recovery and Reinvestment Act which was to target certain sectors of the economy with the view of increasing investment in those sectors and consumption so that Aggregate demand can be stimulated in the economy as those two things are components of Aggregate demand.
A survey of 385 people who like wild sweaters found that 74% had a wild holiday sweater. What is the population and what is the sample?
Answer:
385
Explanation:
because it says 385
In a situation where a survey of 385 people who like wild sweaters found that 74% had a wild holiday sweater, the population as well as the sample will be 385. Therefore, the option C holds true.
What is the significance of a sample?A sample can be referred to or considered as a set of units that are taken into consideration for interpreting a data for bigger number of available observations. Sampling method is considered as an ideal option for surveys to save time and efforts.
In the condition given above, a survey included 385 people out of the total population of the survey, however, the 385 people are just the samples for saving time and effort. The actual results for bigger representation will also be closer to 74%.
Therefore, the option C holds true and states regarding the significance of a sample.
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The missing options for the incomplete question have been added below for better reference.
A survey of 385 people who like wild sweaters found that 74% had a wild holiday sweater. What is the population and what is the sample?
A. 96
B. 289
C. 385
D. 74
The treasurer of a large corporation wants to invest $43 million in excess short-term cash in a particular money market investment. The prospectus quotes the instrument at a true yield of 3.47 percent; that is, the EAR for this investment is 3.47 percent. However, the treasurer wants to know the money market yield on this instrument to make it comparable to the T-bills and CDs she has already bought. If the term of the instrument is 77 days, what are the bond equivalent and discount yields on this investment? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
Bond equivalent yield %
Discount yield %
Answer and Explanation:
The computation is shown below:
Given that,
EAR = 3.47%
1.0347 = (1+R ×77 ÷ 365)^365 ÷ 77
Now Take 365/77th root both sides
So,
1+R × 77 ÷ 365 = 1.00722
1+R × 0.2109 = 1.00722
R × 0.2109 =0.00722
R = 0.03423
Thus, Bond Equivalent Yield = 3.423%
Now
Discount Yield = (360 × 0.03423) ÷ (365+77 × 0.03423)
= 12.3244 ÷ 367.6361
= 0.03352
Thus, Discount Yield = 3.352%
purchased heavy equipment by giving the seller a $30,000 cash down payment and a 5-year interest-bearing note for the $170,000 balance of the price. Compute Pettit's book basis and tax basis in the equipment
Answer: $200,000
Explanation:
The book and tax basis will be the same in this instance because the equipment was purchased newly.
The book and tax basis will be the price of the equipment:
Price = Cash down payment + Present value of interest bearing note
= 30,000 + 170,000
= $200,000
Book and Tax basis is therefore $200,000
New lithographic equipment, acquired at a cost of $859,200 on March 1 of Year 1 (beginning of the fiscal year), has an estimated useful life of five years and an estimated residual value of $96,660. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each year. On the basis of the data presented to the manager, the double-declining-balance method was selected.
Required:
a. Determine the annual depreciation expense for each of the estimated five years of use, the accumulated depreciation at the end of each year, and the book value of the equipment at the end of each year by (a) the straight-line method and (b) the double-declining-balance method. Round your answers to the nearest whole dollar.
b. Journalize the entry to record the sale assuming the manager chose the double-declining-balance method.
Answer and Explanation:
The calculation and the journal entry is given below:
a)
Depreciation expense= (Original cost - Residual Value) ÷ Estimated useful life
= $(859200 - 96660) ÷ 5
= $152508
Year Depreciation Expense Accumulated depreciation Book Value,
1 $152508 $152508 $706692
2 152508 305016 554184
3 152508 457524 401676
4 152508 610032 249168
5 152508 762540 96660
b)
Depreciation rate is
= 100 ÷ 5 × 2
= 40%
Year Depreciation Expense Accumulated depreciation Book Value,
1 $343680 $343680 $515520
( 40% of 859200)
2 206208 549888 309312
(40% of 515520)
3 123725 673613 185587
4 74235 747848 111352
5 14692 762540 96660
(111352-96660)
c)
The journal entry is
Cash $141422.00
Accumulated depreciation- Equipment $747848.00
To Gain on sale of Equipment $30070.00
To Equipment $859200.00
(Being the sale of equipment is recorded)
10 percent decrease in consumer incomes leads to a 20 percent decrease in the quantity demanded of good D. Instructions: Round your answer to one decimal place. If you are entering a negative number be sure to include a negative sign (-) in front of that number. The income elasticity of this good is: . This good can best be described as (Click to select) .
Answer:
Income elasticity = 2
Normal good
Explanation:
Below is the given values:
Percentage decrease in consumers income = 10%
Percentage decrease in quantity demanded = 20%
Use the below formula to find the income elasticity:
Income elasticity = % change in quantity demanded / % in income
Income elasticity = -20/-10
Income elasticity = 2
Since the elasticity is 2 that means good is normal good.
Janet and Megan are debating the use of student discounts by local stores near school. Janet argues, "When stores offer discounts to students with valid identification, it is price discrimination, because they are attempting to separate the market into two groups—each with different demands for that particular good." Megan responds with, "This is not a form of price discrimination, because there is no age restriction for students. Economists generally agree with :
a. Dina
b. Antonio
Answer:
Antonio
Explanation:
In simple words, Antonio has a lot of support among economists. Price discrimination occurs when a vendor is able to split clients into groupings or segregate a marketplace into two categories so that they may charge varying charges to that same two groups. It has hardly anything to deal with the customers' age.
Thus, Antonio is correct with his views.
Molly sells bracelets to Jean's Place, a boutique store. Molly is scheduled to deliver 100 bracelets on July 1. On June 15, Jean, the owner of Jean's Place calls Molly and says "I might not be able to pay for your bracelets." Molly does not deliver the bracelets on July 1. Jean can probably recover from Molly for breach of contract. Group of answer choices True False
Answer: False
Explanation:
The contract is such that Molly agreed to bring bracelets if Jean would pay for said bracelets.
The terms of the contract therefore are that Jean would pay and Molly would deliver. Jean then calls Molly and says that they will be unable to pay which means that they are not going to be able to hold up their responsibilities in the contract.
Molly has the right to then cancel the contract because the other party will not be able to perform their obligations and face no repercussion for it.
Estrada Corporation produced 204,000 watches that it sold for $18 each. The company determined that fixed manufacturing cost per unit was $9 per watch. The company reported a $816,000 gross margin on its financial statements. Required Determine the variable cost per unit, the total variable product cost, and the total contribution margin.
Variable cost per unit
Total sales 204,000 x $18 = $3,672,000
Gross margin (given) $816,000
COGS=Total Sales -Gross Margin ($3,672,000-816,000)= $2,856,000
Total Fixed Cost 204,000 x $9 = $1,836,000
COGS Total variable cost + total fixed cost 2,856,000-1,836,000=$1,020,000
variable cost per unit (1020,000/204,000)= $5
Contribution margin $2,652,000
Given:
Number of watch produced = 204,000
Selling price of each watch = $18
Fixed cost = $9 per watch
Gross margin = $816,000
Find:
Variable cost per unit
Total variable product cost
Total contribution margin
Computation:
Total sales Value = 204,000 × $18
Total sales Value = $3,672,000
Cost of goods sold = Total Sales - Gross Margin
Cost of goods sold = $3,672,000 - $816,000
Cost of goods sold = $2,856,000
Total Fixed Cost = 204,000 × $9
Total Fixed Cost = $1,836,000
Cost of goods sold = Total variable cost + Total fixed cost
So,
Total variable cost = $2,856,000 - $1,836,000
Total variable cost = $1,020,000
Variable cost per unit = $1020,000 / 204,000
Total variable cost = $5
Contribution margin = $3,672,000 - $1,020,000
Contribution margin = $2,652,000
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A project with an initial investment of $460,100 will generate equal annual cash flows over its 11-year life. The project has a required return of 8.2 percent. What is the minimum annual cash flow required to accept the project
Answer: $65,075.85
Explanation:
Given that the cash flow should be constant, it will be an annuity.
The initial investment will be the present value of this annuity.
Present value of annuity = Annuity * ( 1 - (1 + rate)^-number of periods) / rate
460,100 = Annuity * ( 1 - (1 + 8.2%) ⁻¹¹) / 8.2%
460,100 = Annuity * 7.070211525
Annuity = 460,100 / 7.070211525
= $65,075.85
P Company owns 90% of the outstanding common stock of S Company. On January 1, 2015, S Company sold land to P Company for $578,000. S Company originally purchased the land for $427,400. On January 1, 2016, P Company sold the land purchased from S Company to a company outside the affiliated group for $676,100. Calculate the amount of gain on the sale of the land that is recognized on the books of P Company in 2016.
Answer: $98,100
Explanation:
Gain on the sale of the land would be the difference between the amount the land was sold for to the outside entity and the amount that P Company purchased it at.
= Selling price to outside group - Price purchased from S Company
= 676,100 - 578,000
= $98,100
Based on the following information from Scranton Company's balance sheet, calculate the current ratio.
Current assets $87,000
Investments 50,000
Plant assets 220,000
Current liabilities 39,000
Long-term liabilities 90,000
Retained earnings 228,000
Answer:
2.23
Explanation:
Calculation to determine the current ratio
Using this formula
Current Ratio = Current Assets / Current Liabilities
Where,
Current Assets = $87,000
Current Liabilities = $39,000
Let plug in the formula
Current Ratio = $87,000 / $39,000
Current Ratio = 2.23
Therefore Current Ratio is 2.23
Product Y has a value of $100 and a holding cost rate of 10% per year. The ordering costs are $1,000, and the yearly demand is 45,000 units. The economic order quantity can be determined to equal 3,000 (feel free to check this). Determine the total inventory costs (i.e., ordering costs + holding costs) per year.
Answer:
$30,000
Explanation:
Use the following formula to calculate the total cost
Total cost = ordering costs + holding costs
Where
Ordering costs = Numbers of orders placed per year x Ordering Cost per order = ( 45,000 units / 3,000 units per order ) x $1,000 per order = 15 x $1,000 = $15,000
Holding costs = Average Inventory x Holding cost per unit per year = ( 3,000 units / 2 ) x ( $100 x 10% ) = 1,500 units x $10 = $15,000
Placing values in the formula
Total Cost = $15,000 + $15,000
Total Cost = $30,000
