Posted: April 16th, 2016

What costs are included in ordering costs in the economic order quantity model?

1. Bartlett Company is considering a new product, Pear. Bartlett’s fixed costs are $200,000. Pear’s contribution margin is $200 per unit. Bartlett has a marginal tax rate of 25%. How many units of Pear would Bartlett have to sell to have after-tax net income of $1,000,000?

a. 2,250 units
b. 4,750 units
c. 5,000 units
d. 7,667 units

2.During May, Kern Co. produced and sold 10,000 units of a product. Manufacturing and selling costs incurred during May were as follows:
Direct materials and direct labor $200,000
Variable manufacturing overhead $45,000
Fixed manufacturing overhead $10,000
Variable selling costs $5,000
The product’s unit cost under direct (variable) costing was

a. $24.50
b. $25.00
c. $25.50
d. $26.00

3.What costs are included in ordering costs in the economic order quantity model?

a. Handling
b. Insurance
c. Interest on invested capital
d. Quantity discounts lost