Answer:
The Total Cost of Inventory is $4,024,000
Explanation:
The computation of the total cost is shown below:
= Purchase cost + ordering cost + carrying cost
where,
Purchase cost = Annual consumption × Cost per unit\
= 80,000 × $50
= $4,000,000
Ordering cost = (Annual demand ÷ EOQ) × Cost to place one order
= (80,000 ÷ 8,000) × $1,200
= $12,000
Carrying cost = (EOQ ÷ 2) × carrying cost percentage × Cost per unit
= (8,000 ÷ 2) × 6% × $50
= $12,000
Now put these values to the above formula
So, the value would equal to
= $4,000,000 + $12,000 + $12,000
= $4,024,000
