Krause Precision Tools,Inc

question 125

Multiple Choice

Krause Precision Tools,Inc.will use an estimated 700,000 small processors in its manufacturing process next year.The carrying cost of processor inventory is $3.00 per unit and the cost of reordering processors is $100 per order.What is Krause's economic ordering quantity for small processors?

• A) 6,340
• B) 6,831
• C) 7,118
• D) 7,300

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Definitions:

Spot Rate

The current market price at which a particular asset, such as a currency, commodity, or security, can be bought or sold for immediate delivery.

Relative Purchasing Power Parity

Relative Purchasing Power Parity (RPPP) is an economic theory which postulates that the rate at which the exchange rate between two currencies will change over time is equivalent to the rate at which their purchasing power converges, essentially due to inflation rates differences.

Inflation

The rate at which the general level of prices for goods and services is rising, eroding purchasing power over time.

Long-Run Exchange Rate Risk

The potential for financial loss over time due to fluctuations in foreign exchange rates affecting international investments and transactions.