For a Certain Item, the Cost-Minimizing Order Quantity Obtained with the Basic

question 106

Multiple Choice

For a certain item, the cost-minimizing order quantity obtained with the basic EOQ model was 200 units and the total annual inventory (carrying and setup) cost was $600. The inventory carrying cost per unit per year for this item is

• A) $1.50
• B) $2.00
• C) $3.00
• D) $150.00
• E) not enough data to determine

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Definitions:

Merchandise Inventory

refers to the goods available for sale to customers in the retail and wholesale industries.

Cost of Merchandise Sold

The total expense incurred by a business to sell goods over a period, including the cost of acquiring or manufacturing those goods.

Account Form

The form of balance sheet that resembles the basic format of the accounting equation, with assets on the left side and Liabilities and Owner’s Equity sections on the right side.

Merchandising Business

A type of business that purchases goods and resells them to consumers without changing their form, primarily making profit through the retail or wholesale of products.