1. Which of the following is not a cost of carrying inventory?
a. breakage and theft b. obsolescence c. financing and storage costs d. slower inventory turnover
2. A firm has a $5 million revolving credit agreement with its bank at 1.5% over prime with a commitment fee of .5% unborrowed balance. What is the total cost of borrowing in a month when the prime rate is 8% if the firm borrowed $2 million prior to the beginning of the month and takes down an additional $1 million two thirds through the month on the 21st? (Correct answers may differ due to rounding.)
a. $21,875 b. $20,833 c. $20,417 d. $19,583