Exhibit 23.2 Cartwright Computing Expects to Order 126,000 Memory Chips for Inventory

question 13

Multiple Choice

Exhibit 23.2
Cartwright Computing expects to order 126,000 memory chips for inventory during the coming year, and it will use this inventory at a constant rate. Fixed ordering costs are $200 per order; the purchase price per chip is $25; and the firm's inventory carrying costs is equal to 20 percent of the purchase price. (Assume a 360-day year.)
-Refer to Exhibit 23.2.If Cartwright holds a safety stock equal to a 30-day supply of chips,what is Cartwright's minimum cost of ordering and carrying inventory?

• A)$28,500
• B)$15,950
• C)$68,440
• D)$34,220
• E)$47,693

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Definitions:

Total Asset Turnover

A financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue; it is calculated by dividing sales revenue by total assets.

Return on Total Assets

A ratio indicating the efficiency of a company in generating profits from its total assets.

Return on Total Assets

This is a profitability ratio that measures how effectively a company is using its assets to generate profit.

Semiannual Interest

The interest that is calculated and paid twice a year on an investment or loan.