Question

The annual demand of product Y is 1908 units. The ordering cost is $45 per order. Holding cost is $15 per unit per year. Calculate the annual ordering cost when the lot size (i.e., the fixed order quantity) is 67 units.
(Select the appropriate range in which your answer falls.]
a. More than 0 but less than or equal to 700
b. More than 700 but less than or equal to 850
c. More than 850 but less than or equal to 1000
d. More than 1000 but less than or equal to 1150
e. More than 1150

Answer 1

Answer:

Option E

The annual ordering cost is more than $1150

Explanation:

The ordering costs include all the clerical, administrative and transportation costs associated with placing an order.

Annual ordering cos = ordering cost per order × number of order

No of order = Annual demand/order quantity

                   = 1908/67= 28.47 orders

Annual ordering cost = 28.47× 45= $1281.49

Annual ordering cost =$1281.49

The annual ordering cost is more than $1150