The Dead Vase Flowers buys plants for $2 each and resells them for $8.95 each. T
ID: 2798803 • Letter: T
Question
The Dead Vase Flowers buys plants for $2 each and resells them for $8.95 each. The firm sells 3,500 plants per year. Generally, the firm orders 400 plants at a time and has a fixed cost per order of $28. The annual carrying cost per unit is $1.16. To avoid newer plants mixing with older plants, the inventory is totally sold out before it is restocked. The total annual carrying cost is ____ and the total annual restocking cost is _____.
Select one:
a. $232; $245
b. $232; $269
c. $232; $256
d. $211; $245
e. $211; $269
Explanation / Answer
Answer: a. $232 ; $245
Total Annual Carrying Cost = Average stock hold during the year * Annual Carrying Cost
= {(400 + 0)/2 } * $1.16
= 200 * 1.16
= $232
Total Annual Restocking Cost= No. of Orders * Fixed Cost per order.
= (Annual requirement/plants per order) * $28
= 3500/400 * $28
= 8.75 * 28
= $245
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