Exhibit 28.2 Cartwright Computing Expects to Order 126,000 Memory Chips for Inventory

question 25

Multiple Choice

Exhibit 28.2
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 28.2.If the lead time for placing an order is 5 days,and Cartwright holds a safety stock equal to a 30-day supply of chips,then at what inventory level should an order be placed?

• A) 15,570
• B) 3,175
• C) 12,250
• D) 13,675
• E) 8,124

---

Definitions:

Factory Labor Costs

The total expense incurred by a company to pay wages to manufacturing or factory workers directly engaged in producing the goods or services.

Control Account

An account in the general ledger that summarizes subsidiary ledger data.

Control Account

A summary account in the general ledger that consolidates the total amounts recorded in subsidiary ledgers.

Manufacturing Overhead

All indirect costs associated with the production process, including utilities, rent, and salaries for non-direct labor.