A firm wants to develop a level material use schedule based on the following data. What should be the setup cost?
A) $0.45
B) $4.50
C) $45
D) $450
E) $500

Question

A firm wants to develop a level material use schedule based on the following data. What should be the setup cost? 
A) $0.45 
B) $4.50 
C) $45 
D) $450 
E) $500

Quizplus · Accepted Answer

The setup cost can be calculated by finding the total annual ordering cost and dividing it by the total number of orders placed in a year. Based on the data provided, the total annual ordering cost is $450 ($30 x 15). The total number of orders placed in a year is 100 (1,500 ÷ 15). Therefore, the setup cost would be $4.50 ($450 ÷ 100).

A Firm Wants to Develop a Level Material Use Schedule