Question

Garden Variety Flower Shop uses 670 clay pots a month. The pots are purchased at $2.40 each. Annual carrying costs per pot are estimated to be 10 percent of cost, and ordering costs are $10 per order. The manager has been using an order size of 2,000 flower pots. a.What additional annual cost is the shop incurring by staying with this order size?

Answer 1

The additional cost that Garden Variety Flower Shop is incurring in is Inventory.

Step-by-step explanation:

Giving the following information:

Garden Variety Flower Shop uses 670 clay pots a month.

The pots are purchased at $2.40 each.

Annual carrying costs per pot = 10 percent of the cost.

Ordering costs are $10 per order.

The manager has been using an order size of 2,000 flower pots.

The additional cost that Garden Variety Flower Shop is incurring in is Inventory. Inventory cost includes the costs to hold inventory, as well as to administer the related paperwork. This cost is examined by management as part of its evaluation of how much inventory to keep on hand. This can result in changes in the order fulfillment rate for customers, as well as variations in the production process flow.