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Question 4 (5 marks) ToolMart is a small chain of stores catering to the do-it-yourself market with good- quality, well-priced tools for home repairs.
Question 4 (5 marks) ToolMart is a small chain of stores catering to the do-it-yourself market with good- quality, well-priced tools for home repairs. ToolMart's sales are relatively stable at $1,250,000 with an average selling price of $50 and average cost of $11.50. The average cost to place an inventory order is $34 and the storage cost for its inventory is $10 per unit. Average days in inventory is 60. ToolMart's cost of capital is 12% and its tax rate is 28%. Required: a) If ToolMart orders 1,000 units per order, calculate the total annual after-tax order cost. (1 mark) b) Calculate the after-tax cost of holding a unit of inventory. (2 marks) c) Calculate the economic order quantity (EOQ). (2 marks)
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