Scenario 11.2 - S&H Mercantile

Multiple Choice

Scenario 11.2 - S&H Mercantile
The S&H Mercantile in Luther is the only game in town for a number of items, and tries valiantly to use only the storage space needed to display items since there is no stock room in the back of the store. One popular item, a 16-ounce can of dehydrated water, takes up 20 square inches of shelf space. The shelf space available for this item measures five feet by four feet. The store manager would like to order a quantity that can fill the shelf space without stacking and without needing to store cans elsewhere in the store. The amount ordered should all be on display once the S&H runs out and ideally would arrive just as the last can is purchased.
-Suppose the annual demand is 8,000 units and the cost per can is $3 with a holding cost of 10%. What is the required order cost per lot?

A) 32 cents
B) $3.20
C) $32
D) $1.44