Exhibit Cartwright Computing Cartwright Computing Expects to Order 126,000 Memory Chips for Inventory

question 3

Multiple Choice

Exhibit Cartwright Computing
Cartwright Computing expects to order 126,000 memory chips for inventory during the coming year, and it will use this inventory at a constant rate.Fixed ordering costs are $200 per order; the purchase price per chip is $25; and the firm's inventory carrying costs is equal to 20 percent of the purchase price.(Assume a 360-day year.)
-Refer to Exhibit Cartwright Computing.If Cartwright holds a safety stock equal to a 30-day supply of chips, what is its average inventory level?

• A) 12,088
• B) 3,175
• C) 15,750
• D) 13,675
• E) 8,124

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Definitions:

Risk

The potential for losing something of value, either physically, financially, or emotionally, due to a particular action or event.

C.I.F. Contract

Stands for "Cost, Insurance, and Freight," a type of international shipping agreement where the seller pays for the cost of goods, insurance, and freight to a specified destination.

F.O.B. Contract

A shipping agreement where "Free On Board" determines that the seller delivers goods on board a vessel designated by the buyer, transferring the risk from the seller to the buyer once the goods are onboard.

C.O.D. Contract

Contract of "Cash On Delivery" where payment for goods is made at the time of delivery rather than in advance.