What is the budget line for consumption (C) and leisure (L) if a person faces a constant wage of $10 per hour, there are 112 hou
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Given:
Annual Demand(D) = 200,000 × 12 = 2,400,000 units
Cost per order(S) = $500 per order
Holding cost(H) = 20% of Unit cost = $10 × 20% = $2
Unit cost =$10
Computation:
1) Optimal Order size =
Optimal Order Size=
2)
Annual holding cost = (34,641 / 2) × 2
Annual holding cost = $34,641
3) Number of Order per year = Annual demand / Optimal Order Quantity
Number of Order per year = 2,400,000 / 34,641
Number of Order per year = 69.2820646
Number of Order per year = 69 order (Approx)
4) Annual variable transportation cost = Transportation per unit × Annual Demand
Annual variable transportation cost = $0.10 × 2,400,000
Annual variable transportation cost = $240,000
5) Annual Clerical Cost = Number of Order per year × Cost per Order
Annual Clerical Cost = 69.282 × $500
Annual Clerical Cost = $34,641