Question C:

Menens photography Store sells 25,000 packets of photographic paper per year. The store is closed only for two weeks during the year due to annual holidays. The wholesale price is $3 per packet. The cost of processing each order to be placed with the wholesaler is $8 and carrying costs are $0.10 per packet per year.

Required:

1. What is the EOQ for the store? (1.5 Marks)

2. Compute the total annual:

(i) Number of orders, (1 Marks)

(ii) Total ordering costs, (1.25 Marks)

(iii) Total carrying costs (1.25 Marks)

(iv) Explain why traditional overhead allocation methods (i.e., plant-wide and departmental) distort product

costs compared to ABC costing. (60 to 100 words) (1 Marks)

(Total 6 Marks)