Aberwald Corporation Expects to Order 126,000 Memory Chips for Inventory

question 9

Multiple Choice

Aberwald Corporation 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.)
-If Aberwald 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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