Fashion Clothiers Inc. Assume That Fashion Clothiers Inc. Uses 1,440,000 Yards of Material

question 131

Multiple Choice

Fashion Clothiers Inc.
Assume that Fashion Clothiers Inc. uses 1,440,000 yards of material each year. Further, assume that Fashion can order the material at a cost of $2 per yard, plus fixed ordering costs of $100 per order. The firm's carrying cost is 20 percent of the inventory value, at cost.
-Refer to Fashion Clothiers Inc.What is Fashion Clothiers' minimum cost of ordering and holding inventory?

• A) $6,254
• B) $10,733
• C) $11,560
• D) $13,563
• E) $19,825

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Definitions:

LIFO

LIFO, or Last In, First Out, is an inventory valuation method where the last items to be added to inventory are assumed to be the first ones sold.

Ending Inventory

The total value of a company's merchandise, goods, and products held at the end of an accounting period.

Sales Revenue

The income received by a company from its sales of goods or the provision of services.

Gross Profit

The difference between revenue and the cost of making a product or providing a service, before deducting overheads, payroll, taxation, and interest payments.