Scenario 9.3 The Talbot Company Uses Electrical Assemblies to Produce an Array

question 113

Multiple Choice

Scenario 9.3
The Talbot Company uses electrical assemblies to produce an array of small appliances. One of its high cost / high volume assemblies, the XO-01, has an estimated annual demand of 8,000 units. Talbot estimates the cost to place an order is $50, and the holding cost for each assembly is $20 per year. The company operates 250 days per year.
-Use the information in Scenario 9.3. What is the total annual holding and ordering costs if Talbot orders using the EOQ quantity?

• A) greater than $7,000
• B) greater than $5,000 but less than or equal to $7,000
• C) greater than $2,500 but less than or equal to $5,000
• D) less than or equal to $2,500

---

Definitions:

Exclusive Right

A legal provision granting someone the sole authority to undertake a particular activity or use a specific property.

Franchisor's Name

The legal name of the entity that grants the license to a franchisee for the conducting of a business under the franchisor's trademarks and business model.

Installment Sales Method

An accounting technique for recognizing revenue and expenses for sales made on credit, proportionate to the cash collected from the customer.

Cost Recovery Method

An accounting technique used to recognize revenue only after all costs are recovered.