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3 years ago

14

Abey Kuruvilla, of Parkside Plumbing, uses 1 comma 200 of a certain spare part that costs $24 for each order, with an annual

holding cost of $24. a) Calculate the total cost for order sizes of 25, 40, 50, 60, and 100 (round your responses to two decimal places).

1 answer:

BlackZzzverrR [31]3 years ago

7 0

Answer:

The total cost is $345,600 at each order size.

Explanation:

Given that,

Annual holding cost = $24

Fixed cost each order = $24

Units demand per year = 1,200

(a) At order size of 25,

Total inventory cost:

= Annual holding cost × Fixed cost each order × (Order quantity ÷ 2) × (Units demand per year ÷ Order quantity)

= $24 × $24 × (25 ÷ 2) × (1,200 ÷ 25)

= $345,600

(b) At order size of 40,

Total inventory cost:

= Annual holding cost × Fixed cost each order × (Order quantity ÷ 2) × (Units demand per year ÷ Order quantity)

= $24 × $24 × (40 ÷ 2) × (1,200 ÷ 40)

= $345,600

(c) At order size of 50,

Total inventory cost:

= Annual holding cost × Fixed cost each order × (Order quantity ÷ 2) × (Units demand per year ÷ Order quantity)

= $24 × $24 × (50 ÷ 2) × (1,200 ÷ 50)

= $345,600

(d) At order size of 60,

Total inventory cost:

= Annual holding cost × Fixed cost each order × (Order quantity ÷ 2) × (Units demand per year ÷ Order quantity)

= $24 × $24 × (60 ÷ 2) × (1,200 ÷ 60)

= $345,600

(e) At order size of 100,

Total inventory cost:

= Annual holding cost × Fixed cost each order × (Order quantity ÷ 2) × (Units demand per year ÷ Order quantity)

= $24 × $24 × (100 ÷ 2) × (1,200 ÷ 100)

= $345,600

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