ToolMart is a small chain of stores catering to the do-it-yourself market with good- quality,...
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Accounting
ToolMart is a small chain of stores catering to the do-it-yourself market with good- quality, well-priced tools for home repairs. ToolMarts sales are relatively stable at
$1,250,000 with an average selling price of $50 and average cost of $11.50. The average cost to place an inventory order is $34 and the storage cost for its inventory is
$10 per unit. Average days in inventory is 60. ToolMarts cost of capital is 12% and its tax rate is 28%.
Required:
If ToolMart orders 1,000 units per order, calculate the total annual after-tax order cost.
Calculate the after-tax cost of holding a unit of inventory.
Calculate the economic order quantity (EOQ).
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