Answer:
D. $6800
Explanation:
Annual demand = 600 × 50 weeks = 30,000 bottles
Carrying cost or holding cost = $50 × 40% = $20
The economic order quantity = 500 bottles
The number of orders would be equal to
= Annual demand ÷ economic order quantity
= 30,000 ÷ 500
= 60 orders
The average inventory would equal to
= Economic order quantity ÷ 2
= 500 bottles ÷ 2
= 250 bottles
The total cost of ordering cost and carrying cost equals to
Ordering cost = Number of orders × ordering cost per order
= 60 orders × $30
= $1,800
Carrying cost = average inventory × carrying cost per unit
= 250 bottles × $20
= $5,000
So, the total would be
= $5,000 + $1,800
= $6,800
