Current Asset Management 4

Current Asset Management 4 - Also assume that the firm has...

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Old Exam Questions - Current Asset Management Page 4 of 12 Pages A company believes that it will need to order 225,000 units of inventory over the coming year. The current price per unit of inventory is $2 per unit. Fixed ordering charges for inventory are $200 per order and carrying costs for inventory are equal to 5 percent of the average value (price) of the inventory carried. 8. Determine the optimal (economic) order quantity. Hint: total inventory costs will be $3,000. A. 25,000 B. 27,250 C. 32,500 D. 35,000 E. 30,000 9. Assume now that the firm has the option of taking a 10 percent discount (price of $1.80 per unit) if it orders 37,500 units per order (6 orders per year).
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Unformatted text preview: Also assume that the firm has decided to carry, on a permanent basis, 5,000 units of safety stock. Determine the new level of total inventory costs if the firm both takes the quantity discount and carries safety stocks of 5,000 units. A. $3,385.50 B. $3,337.50 C. $3,418.50 D. $3,492.50 E. $3,451.50 10. Income Statement Year 0 Year 1 Sales 3,600.00 3,960.00 Variable Costs - 2,700.00 Gross Profit 900.00 Fixed Costs - 400.00 Bad Debt Expense: Original - 72.00-72.00 New ---EBIT 428.00 Interest: Original - 100.00-100.00 New ---EBT 328.00 Taxes (40%) - 131.20...
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