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Gailey Ltd. is a distributor of headphones. P Mart is a local retail outlet which sells headphones. P Mart purchases headphones from Gailey Ltd. at
Gailey 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
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