Reference no: EM133233502
Alpha Company produces a specialty wood furniture product, and has the following information available concerning its costs and inventory items:
Relevant ordering costs per purchase order $550
Relevant carrying costs per year for each unit of the product:
Required annual return on investment 17%
Required other costs $7
Annual demand is 30,000 units per year. The purchase price is $53 per unit.
Which of the following statements is true of Alpha's economic order quantity (EOQ) system costs?
a. At EOQ, the annual relevant carrying costs is equal to the annual relevant total costs.
b. At EOQ, the annual relevant carrying costs is exactly half of the annual relevant total costs.
c. At EOQ, the annual relevant carrying costs is higher than the annual relevant ordering costs.
d. None of the answers.
e. At EOQ, the annual relevant ordering costs is exactly half of annual relevant carrying costs.
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Available concerning costs and inventory items
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