Question

A bicycle manufacturer purchases bicycle seats from an outside supplier for $20 each. The manufacturer’s inventory...

A bicycle manufacturer purchases bicycle seats from an outside supplier for $20 each. The manufacturer’s inventory of seats turns over 1.2 times per month, and the manufacturer has an annual inventory holding cost of 32%. (Round your answer to 2 decimal places.) What is the inventory holding cost (in $) for a bicycle seat?

Homework Answers

Answer #1

Let the number of seats purchased annually = N

Therefore , total annual value of seats = $20 / seat x N seats = $20.N

Inventory of seats turnover per month = 1.2 times

Therefore, inventory of seats turnover per year = 1.2 x 12 = 14.4 times

Since , Inventory turnover = Annual value of seats / average inventory of seats

Therefore, 14.4 = Annual value of seats / Average inventory of seats

Or, 14.4 = 20.N / average inventory of seats

Or, Average inventory of seats = 20N/14.4

Or, Average inventory of seats = 1.3888.N

Therefore , annual inventory holding cost for N number of seats = 32% of $20/ seat x 1.3888 .N seats = $8.888.N seats

Hence, average inventory holding cost per seat = $8.888.N / N = $8.888

ANNUAL INVENTORY HOLDING COST OF A BICYCLE SEAT = $8.888

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A local bookstore turns over its inventory once every two months. The bookstore’s annual cost of...
A local bookstore turns over its inventory once every two months. The bookstore’s annual cost of holding inventory is 31%. (Round your answer to 2 decimal places.) What is the inventory holding cost (in $) for a book that the bookstore purchases for $8 and sells for $15?
Q2. A company purchases 25,000 litres of material each year from a single supplier. At the...
Q2. A company purchases 25,000 litres of material each year from a single supplier. At the moment, the company obtains the material in batch sizes of 800litres. The materials costs $16 per litre. The cost of ordering new batch is $32 and the cost of holding one litre in stock is $4 a year plus an interest cost equal to 15% of the purchase price of the material. Calculate: a. The Economic Order Quantity b. Total ordering cost c. Total...
The Ziggys Bicycle Shop operates 364 days a year, closing only on Christmas Day. The shop...
The Ziggys Bicycle Shop operates 364 days a year, closing only on Christmas Day. The shop pays $400 for a particular bicycle purchased from the manufacturer. The annual holding cost per bicycle is estimated to be 20% of the dollar value of inventory. The shop sells an average of 20 bikes per week. The cost for each order is $225. Determine the optimal order quantity, optimal number of orders, order cycle time, and the total minimum cost. Determine reorder point...
A retailer purchases a certain type of chemical from a supplier on the following quantity discount...
A retailer purchases a certain type of chemical from a supplier on the following quantity discount schedule: • If the order amount is less than 100 kg.s, the supplier charges $30 per kg. • If the order amount is at least 100 kg.s and less than 500 kg.s, the supplier applies an incremental discount where the first 100 kg. costs $30 per kg. and the remaining amount costs $28 per kg. • If the order amount is at least 500...
Sheffield Inc. has provided you with the following information. This company purchases its inventory from a...
Sheffield Inc. has provided you with the following information. This company purchases its inventory from a supplier for cash and has only cash sales. Sheffield uses the average cost formula in a perpetual inventory system. Increased competition has recently reduced the price of the product. Date Explanation Units Unit Cost Unit Price Apr. 1 Beginning inventory 50 $78 6 Purchases 110 89 8 Sales (130 ) $120 15 Purchases 120 68 20 Sales (120 ) 102 27 Purchases 20 59...
Your firm purchases goods from its supplier on terms of 1.8 divided by 15, net 30....
Your firm purchases goods from its supplier on terms of 1.8 divided by 15, net 30. a. What is the effective annual cost to your firm if it chooses not to take the discount and makes its payment on day 30​? The effective annual cost is_----​%. ​(Round to two decimal​ places.) b. What is the effective annual cost to your firm if it chooses not to take the discount and makes its payment on day 40​? The effective annual cost...
1. The use of a production smoothing strategy creates inventory for products that experience a seasonal...
1. The use of a production smoothing strategy creates inventory for products that experience a seasonal fluctuation in demand.   True or False ? 2. Companies belonging to the same industry segment should have the same inventory turns.  True or False ? 3. Which of the following is a work-in-process inventory for C&A Bakery? A. Flour B. Cupcakes freshly out of the oven C. Ovens D. Cupcake mix prepared from scratch 4. C&A has on average $6000 in inventory and its daily...
Cheeseburger and Taco Company purchases 10,570 boxes of cheese each year. It costs $20 to place...
Cheeseburger and Taco Company purchases 10,570 boxes of cheese each year. It costs $20 to place and ship each order and $8.89 per year for each box held as inventory. The company is using Economic Order Quantity model in placing the orders. What is the annual ordering cost of cheese inventory. Round the answer to two decimals.
A manufacturer buys two types of parts from the same supplier. Part A costs € 5...
A manufacturer buys two types of parts from the same supplier. Part A costs € 5 per unit and part B costs € 38 per unit. The order costs equals € 350 both for part A and B. The inventory holding cost is based on the annual financing cost and equals 25%. The manufacturer requires 20000 units of A and 14000 units of B per year. Assume demand is constant throughout the year. 1. Determine the optimal order quantity for...
Speedy Bicycle Company (SBC) is a wholesale distributor of a wide variety of bicycles and bicycle...
Speedy Bicycle Company (SBC) is a wholesale distributor of a wide variety of bicycles and bicycle parts. The most popular model is the Dragonfly, which sells for $170. All manufacturing is done at a plant in China, and shipment takes a month (30 days) from the time an order is placed. The estimated order cost is $75, including customs clearance. SBC’s cost per bicycle is 65% of retail price, and inventory carrying cost is 11% per year of SBC’s cost....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT