Reference no: EM132705244

Question - Par Uno Inc. is a distributor of golf balls. Comprabola's Golf Supplies is a local retail outlet which sells golf balls. Comprabola's purchases the golf balls from Par Uno Inc. at $0.75 per ball; the golf balls are shipped in cartons of 72. Par Uno Inc. pays all incoming freight, and Comprabola's Golf Supplies does not inspect the balls due to Par Uno' reputation for high quality. Annual demand is 155,520 golf balls at a rate of 2,991 balls per week. Comprabola's Golf Supplies 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 $125.00

Carrying costs per carton per year;

Relevant insurance, materials handling,

breakage, etc..per year $0.77

If Comprabola's makes an order (1/12 of annual demand) once per month, what is the carrying cost per carton?

a. $0.77

b. $6.48

c. $7.25

d. $8.02