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What are the relevant total costs

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Reference no: EM132756179

Question: Spencer Industries produces a single product, and has the following information available concerning this item:

Relevant ordering costs per purchase order $400

Relevant carrying costs/unit per year:

Required annual return on investment 20%

(Hurdle Rate)

Required other costs per year (insurance, etc.) $10.00

Annual demand is 100,000 units per year. The purchase price per package is $80.

HINT: When you are calculating total carrying cost/unit, don't forget to add opportunity cost to the $10.00/unit.

What are the relevant total costs (ordering cost + carrying cost) if Spencer Industries insists on using an order size equal to 2,000 units?

Reference no: EM132756179

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