Question

Suppose Big Box Office Supply (BBOS) purchases 100,000 office chairs every year. Ordering costs are $95.00 per order and carrying costs are $4.95 per chair. What is BBOS’s total inventory cost per year, including both carrying costs and ordering costs, if BBOS orders the EOQ of office chairs? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box.

Using the data from problem 13, Big Box Office Supply (BBOS) is able to negotiate a reduction in the carrying costs to $3.50 per chair, but BBOS’s chair supplier offers a quantity discount of $0.22 per chair if BBOS orders 5,000 chairs at a time rather than the EOQ. Determine the before–tax benefit or loss of accepting the quantity discount. (Assume the carrying cost remains at $3.50 per chair whether or not the discount is taken.) Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box.

Answer 1