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Office One Super Store sells office furniture, equipment, supplies and business technology for small...

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Question

Accounting

Office One Super Store sells office furniture, equipment, supplies and business technology
for small businesses and home offices. The company sells 5600 file cabinets per year, 60%
of which are imported from Canada. All the imported file cabinets are purchased from a
single supplier at a cost of $40 each. The shop calculates annual holding cost as 20% of
unit cost per year. The set up cost for placing an order is estimated to be $350. The current reorder policy is to buy the imported file cabinets only once every four
months. What is the additional annual total cost incurred by this policy compared to using
the original EOQ?

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