(Identification of carrying, ordering costs) Bama Steel management has been evaluating company policies with respect to control of costs of metal tubing, one of the firm’s major component materials. The firm’s controller has gath¬ ered the following financial data, which may be pertinent to controlling costs associated with the metal tubing:

a. Which of the ordering costs should Bama’s controller consider in per¬ forming short-run decision analysis? Explain.

b. Which of the carrying costs should Bama’s controller consider in per¬ forming short-run decision analysis? Explain.

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Ordering Costs Annual salary of purchasing department manager Depreciation of equipment in purchasing department Cost per order for purchasing department supplies Typical phone expense per order placed Monthly expense for heat and light in purchasing department Carrying Costs Annual depreciation on materials storage building $41,500 22,300 0.30 3.02 400 $15,000 Annual inventory insurance premium (per dollar of inventory value) 0.05 Annual property tax on materials storage building 2,500 Obsolescence cost per dollar of average annual inventory 0.07 Annual salary of security officer assigned to the materials storage building 18,000