Rock Bottom Carpets Sells 3,100 Carpets a Year at an Average

question 73

Multiple Choice

Rock Bottom Carpets sells 3,100 carpets a year at an average price per carpet of $1,640.The carrying cost per unit is $218.40.The company orders 500 carpets at a time and has a fixed order cost of $78 per order.The carpets are sold out before they are restocked.What is the economic order quantity?

• A)38 carpets
• B)66 carpets
• C)47 carpets
• D)51 carpets
• E)72 carpets

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Definitions:

Partial Equity Method

An accounting technique used for investments, where the investment is recorded at cost and adjusted for the investor's share of the investee's income, losses, and dividends.

Excess Consideration

The amount paid over the fair value of net assets during an acquisition, often recorded as goodwill on the balance sheet.

Equipment Undervalued

A situation in which the book value of equipment is recorded at less than its fair market value.

Partial Equity Method

A method of accounting for investments where the investor recognizes its share of the profits and losses of the investee, to the extent of its initial investment, in its financial statements.