Answer the following questions using the information below:
The Allianz Company produces a specialty wood furniture product, and has the following information available concerning its inventory items:
$\begin{array} { l }
\text {Relevant ordering costs per purchase order }&\$450 \
\text {Relevant carrying costs per year for each package: }& \
\text { Required annual return on investment}& 15\%\
\text {Required other costs per wear }& \$4\
\end{array}$
Annual demand is 30,000 packages per year. The purchase price per package is $48.
-What are the relevant total costs at the economic order quantity?
A) $17,390
B) $10,392
C) $13,942
D) $11,800

Question

Answer the following questions using the information below:
The Allianz Company produces a specialty wood furniture product, and has the following information available concerning its inventory items:
 $\begin{array} { l  }
 \text {Relevant ordering costs per purchase order  }&\$450 \
 \text {Relevant carrying costs per year for each package: }& \
 \text { Required annual return on investment}& 15\%\
 \text {Required other costs per wear }& \$4\
\end{array}$
 Annual demand is 30,000 packages per year. The purchase price per package is $48.
-What are the relevant total costs at the economic order quantity?
A) $17,390
B) $10,392
C) $13,942
D) $11,800

Quizplus · Accepted Answer

The relevant total costs at the economic order quantity are the sum of the relevant ordering costs and the relevant carrying costs. The relevant ordering costs are the ordering costs per purchase order multiplied by the number of purchase orders per year. The number of purchase orders per year is the annual demand divided by the economic order quantity. The relevant carrying costs are the carrying costs per year for each package multiplied by the economic order quantity. The economic order quantity is the square root of the product of the annual demand and the relevant ordering costs divided by the relevant carrying costs.In this case, the relevant ordering costs are $450 per purchase order, the annual demand is 30,000 packages per year, the relevant carrying costs are $4 per package per year, and the required annual return on investment is 15%. The economic order quantity is therefore:```EOQ = √(2 * 30,000 * $450) / $4 = 1,500 packages```The relevant total costs at the economic order quantity are therefore:```Relevant total costs = Relevant ordering costs + Relevant carrying costs= $450 * (30,000 / 1,500) + $4 * 1,500= $17,390```Therefore, the correct answer is A: $17,390.

Answer the Following Questions Using the Information Below: the Allianz

Answer the Following Questions Using the Information Below:
the Allianz