Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Finch Pet Supplies purchases its inventory from a variety of suppliers, some of which require a six-week lead time before delivering the goods. To ensure

image text in transcribed
Finch Pet Supplies purchases its inventory from a variety of suppliers, some of which require a six-week lead time before delivering the goods. To ensure that she has a sufficient supply of goods on hand, Ms. Leblanc, the owner, must maintain a large supply of inventory. The cost of this inventory averages $21,100. She usually finances the purchase of inventory and pays a 8 percent annual finance charge. Ms. Leblanc's accountant has suggested that she establish a relationship with a single large distributor who can satisfy all of her orders within a two-week time period. Given this quick turnaround time, she will be able to reduce her average inventory balance to $3,300. Ms. Leblanc also believes that she could save $3,000 per year by reducing phone bills, insurance, and warehousetrental space costs associated with ordering and maintaining the larger level of inventory. Required b. Based on the information provided, how much of Ms. Leblanc's inventory holding cost could be eliminated by taking the accountant's advice? Answer is complete but not entirely correct

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Automotive Process Audits Preparations And Tools Practical Quality Of The Future

Authors: D. H. Stamatis

1st Edition

036775939X, 978-0367759391

More Books

Students also viewed these Accounting questions