Final answer:
The total cost of using a Lot For Lot policy for item X, which involves only ordering costs, is $240 for four periods. This is calculated by multiplying the number of orders (one per period) by the cost per order ($60). Carrying costs do not apply as no inventory is kept under LFL.
Step-by-step explanation:
To calculate the cost of using a Lot For Lot (LFL) policy, we need to consider both ordering costs and carrying costs for item X. The LFL policy implies ordering exactly what is needed for each period without keeping inventory. Hence, there are no carrying costs since we do not hold any inventory. However, we place an order for each period which incurs ordering costs.
Given the following details:
- Ordering Cost: $60 per order
- Carrying Cost: $0.50 per period (but this is not applicable for LFL)
- Quantity needed per period can be observed from the Amount Spent divided by the Price for each period:
- Pd 1: $60 / $3.00 = 20 units
- Pd 2: $64 / $3.20 = 20 units
- Pd 3: $62 / $3.10 = 20 units
- Pd 4: $70 / $3.50 = 20 units
Since an order is placed in each of the four periods, and the ordering cost is $60 per order:
- Total Ordering Cost for 4 periods: 4 orders x $60/order = $240
Therefore, the total cost of using a Lot For Lot policy for item X across the four periods is $240. Remember, this cost includes only the ordering costs since the carrying costs are not applicable under the LFL policy where there's no inventory held.