Green Lantern, a pub & grill estimates that it will sell 10 000 beers per year which it will purchase from a distributor in Luanshya. A beer costs K18.00 to purchase and K2.00 in freight charges each. The company borrows funds at 9 % interest rate to finance inventories. Green Lantern’s purchasing agent has calculated that it costs K50.00 to place an order for beers and that the handling is K3.00 for each beer. 1. What is the financial consequence if only 7 orders are placed for the year instead of ordering at the EOQ level? 2. What is the cost of money called 3. What is the process costing system
Green Lantern, a pub & grill estimates that it will sell 10 000 beers per year which it will purchase from a distributor in Luanshya. A beer costs K18.00 to purchase and K2.00 in freight charges each. The company borrows funds at 9 % interest rate to finance inventories. Green Lantern’s purchasing agent has calculated that it costs K50.00 to place an order for beers and that the handling is K3.00 for each beer. 1. What is the financial consequence if only 7 orders are placed for the year instead of ordering at the EOQ level? 2. What is the cost of money called 3. What is the process costing system
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Green Lantern, a pub & grill estimates that it will sell 10 000 beers per year which it will purchase from a distributor in Luanshya. A beer costs K18.00 to purchase and K2.00 in freight charges each. The company borrows funds at 9 % interest rate to finance inventories. Green Lantern’s purchasing agent has calculated that it costs K50.00 to place an order for beers and that the handling is K3.00 for each beer.
1. What is the financial consequence if only 7 orders are placed for the year instead of ordering at the EOQ level?
2. What is the cost of money called
3. What is the
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