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Recent Interest Rate Increases Have Increased the Cost of Carrying

question 96

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Recent interest rate increases have increased the cost of carrying the inventory.What will be the effect of this on EOQ, if the sales and order costs remain the same?


Definitions:

Mark-Up Percentage

Mark-up percentage is the ratio of profit added to the cost price to determine the selling price.

Cost-Plus Pricing

A pricing method where the seller establishes the sale price by adding a defined markup to the cost per unit of the product.

Total Variable Cost

Total Variable Cost is the sum of all costs that vary directly with the level of production or sales volume; they increase as production increases and decrease as production decreases.

Mark-Up Percentage

A financial ratio indicating the percentage by which a product's selling price exceeds its cost, used to determine selling prices.

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