Aberwald Corporation Expects to Sell 120,000 Memory Chips This Year

question 29

Multiple Choice

Aberwald Corporation expects to sell 120,000 memory chips this year. Aberwald has determined that it costs $3 to carry each chip in inventory and $50 each time an order for raw materials is placed. Assuming Aberwald always orders the EOQ amount, what will be its total ordering cost this year?

• A)$7,2000
• B)$260,000
• C)$3,000
• D)$800
• E)$6,000

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Definitions:

Down Payment

A down payment is an initial upfront portion of the total amount due and is usually given in cash at the time of finalizing the transaction.

Zero-Interest Financing

A financing method where no interest is charged over the loan period, making it an attractive option for borrowers.

Monthly Payment

A regular payment made each month, usually in the context of loan repayments or leasing arrangements.

Compounded Annually

A calculation of interest where the interest earned over a period is added to the principal, and the total becomes the principal for the next computation period on a yearly basis.