ailey Ltd. is a distributor of headphones. P Mart is a local retail outlet which sells headphones. P Mart purchases headphones from Gailey Ltd. at $29.00 per headphone set. Headphones are shipped in packages of 60. Gailey Ltd. pays all incoming freight, and P Mart does not inspect the headphones due to Gailey's reputation for high quality. Annual demand is 320,000 headphones at a rate of 6500 headphones per week. P Mart earns 11% on its cash investments. The purchase-order lead time is one week. The following cost data are available:

Relevant ordering costs per purchase order $115.50

Carrying costs per package per year:

Relevant insurance, materials handling,

breakage, etc., per year $6.50