Smithson Cutting is opening a new line of scissors for supermarket distribution. It estimates its fixed cost to be $ 450.00 and
1 answer:
Answer:
The break even point is 1,800 units.
Explanation:
Smithson Cutting is opening a new line of scissors for supermarket distribution.
The fixed cost is estimated to be $450.00 and its variable cost to be $0.50 per unit.
Selling price is expected to average $0.75 per unit.
Contribution margin per unit
= Sales - Variable cost
= $0.75 - $0.50
= $0.25
Break even point
=
=
= 1,800
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Answer:
$418,550
Explanation:
Steps are shown below:
a. The computation of the economic order quantity is shown below:
=
=
= 2,040 units
b. The number of orders would be equal to
= Annual demand ÷ economic order quantity
= $52,000 ÷ 2,040 units
= 25.49 orders
c. The average inventory would equal to
= Economic order quantity ÷ 2
= 2040 units ÷ 2
= 1,020 units
d. The total cost of ordering cost and carrying cost equals to
Ordering cost = Number of orders × ordering cost per order
= 25.49 orders × $50
= $1,275
Carrying cost = average inventory × carrying cost per unit
= 1,020 units × $1.25
= $1,275
So, the total annual cost would be
= Purchase cost + ordering cost + carrying cost
= $416,000 + $1,275 + $1,275
= $418,550
Purchase cost = Annual demand × cost per unit
= 52,000 × $8
= $416,000