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Question - The Wood Furniture company produces a specialty wood furniture product, and has the following information available concerning its inventory items:
Relevant ordering costs per purchase order $300
Relevant carrying costs per year:
Required annual return on investment 10%
Required other costs per year $2.80
Annual demand is 20,000 packages per year. The purchase price per package is $32.
1. What is the economic order quantity?
a. 789 units
b. 1,429 units
c. 1,356 units
d. 1,415 units
2. What is the minimum feasible total cost of inventory?
a. $7,414
b. $8,490
c. $6,243
d. $8487
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