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
