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Question - Ephrem Retail Store has annual budgeted sales of 20,000 mountain bikes for the year 2021. The store will be closed for two weeks during the year due to annual holidays. The wholesale purchase price per bike is $540. The cost of processing each order to be placed with the wholesaler is $40 and carrying costs are $10 per bike per year.
Required -
1. What is the EOQ for the store?
2. Compute the total annual:
(i) Number of orders,
(ii) Total ordering costs,
(iii) Total carrying costs
(iv) Explain why traditional overhead allocation methods (i.e., plant-wide and departmental) distort product costs compared to ABC costing.
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