Cornerstones of Managerial Accounting 6th Edition by Maryanne Mowen,Don Hansen ,Dan Heitger

Exercise 2

Ordering Cost, Carrying Cost, and Total Inventory-Related Cost
La Cucina Company sells kitchen supplies and housewares. Lava stone is used in production of molcajetes (mortars and pestles used in the making of guacamole) and is purchased from external suppliers. Each year, 8,000 pounds of lava stone is used; it is currently purchased in lots of 500 pounds. It costs La Cucina $5 to place the order, and carrying cost is $2 per pound per year
Refer to the data for La Cucina Company above.
Required:
1. How many orders for lava stone does La Cucina place per year?
2. What is the total ordering cost of lava stone per year?
3. What is the total carrying cost of lava stone per year?
4. What is the total cost of La Cucina's inventory policy for lava stone per year?