If the Order Quantity Per Order Is 2,000 Units,annual Demand

question 9

Multiple Choice

If the order quantity per order is 2,000 units,annual demand is 10,000,and cost per order is $50,then which of the following statements is true?

• A)There are five orders in the year.
• B)The total annual ordering cost is $2,500.
• C)The holding cost per unit is $2.50.
• D)The total annual holding costs are $25,000 (= $2.50 * 10,000).

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Definitions:

Predetermined Overhead Rate

A rate used to allocate estimated indirect costs to individual units of production, based on a predetermined formula.

Product Costs

The costs directly associated with the production of goods or services, including materials, labor, and manufacturing overhead.

Budgeted Overhead

Forecasted costs related to the operation of a business that do not directly correlate to the production of goods or services.

Actual Overhead

The actual costs incurred for overhead in a specific period, including expenses for indirect materials, indirect labor, and other overhead costs.