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O'Tooley Conservative Flags is a local retail outlet which sells flags. O'Tooley purchases the flags from Puton Inc. at $5.75 per flag; the golf balls are shipped in boxes of 24, FOB destination. Annual demand is 72,800 flags at a rate of 1402 flags per week. O'Tooley Conservative Flags earns 12% on its cash investments. The purchase order lead time is one week.
The following cost data are available:
Relevant ordering costs per purchase order $225.00
Relevant insurance, materials handling, breakage, etc., per year $1.77
Problem 1: If O'Tooley Conservative Flags makes an order (1/12 of annual demand) once per month, what are the relevant total costs?
A) $1,500.00
B) $2,085.67
C) 2,225.00
D) $3,000.00
E) $680.00
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