Wheels & Deals Limited uses 60,000 batteries each year in its production of motorcycles at a cost of $450 per battery. The cost of placing an order is $75.00. The cost of holding one unit of inventory for one year is 0.5% of the unit purchase price. Currently, Wheels & Deals Limited places 12 orders of 5,000 batteries per year. Compute the cost Wheels & Deals’ current inventory policy. Is this the minimum cost? Explain.
BAYWEST began the third quarter (July to September) of 2020 with 30 (Alcatel) tablets at a total cost of $187,800.
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July 8 |
98 tablets were purchased at a cost of $6,202 each. In addition, the business paid a freight charge of $248 cash on each tablet to have the inventory shipped from the point of purchase to their warehouse |
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July 31 |
The sales for July were 85 tablets which yielded total sales revenue of $809,030. (25 of these tablets were sold on account to longstanding customers) |
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August 4 |
A new batch of 67 tablets was purchased at a total cost of $465,650 |
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August 10 |
5 of the tablets purchased on August 4 were returned to the supplier, as they were not of the model ordered. |
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August 31 |
During the month 60 tablets were sold at a price of $10,350 each. |
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September 4 |
A customer, to whom 9 tablets were sold during the first business day of August, returned 3 of the instruments, as they were of another brand. |
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September 10 |
Owing to an increased demand, a further 115 tablets were purchased at a cost of $7,900 each; these were subject to a trade discount of 2% each. |
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September 30 |
121 tablets were sold during September at a unit selling price of $11,085. |
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September 30 |
An actual count of inventory was carried out which revealed that there were 34 units of the “Alcatel” brand of merchandise in the store room. |
Wheels & Deals Limited uses 60,000 batteries each year in its production of motorcycles at a cost of $450 per battery. The cost of placing an order is $75.00. The cost of holding one unit of inventory for one year is 0.5% of the unit purchase price. Currently, Wheels & Deals Limited places 12 orders of 5,000 batteries per year. Compute the cost Wheels & Deals’ current inventory policy. Is this the minimum cost? Explain.
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