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Answer:
Total annual inventory cost = $480
c) 480
Step-by-step explanation:
given data
annual demand for the oil filter = 1200 units
ordering cost per order S = $80
holding cost of carrying 1 unit = $1.2 per year
lead time = 12 working days
number of working days = 360 days
solution
we get here economic order quantity that is express as
economic order quantity = ...............1
here D is annual demand and S is ordering cost and H is per unit cost
so put here value and we get
EOQ =
EOQ = 400 units
and
Annual ordering cost = annual demand × ordering cost ÷ order size .........2
and here
No orders (Q) = annual demand ÷ order size ...........3
Q = 1200 ÷ 400
Q = 3 orders
so
Annual ordering cost = ordering cost × number of order ................4
put here value
Annual ordering cost = 80 × 3
Annual ordering cost = $240
and
Annual carrying cost = average inventory × per unit cost ..........5
and
average inventory = EOQ ÷ 2 ...........6
Annual carrying cost = (EOQ × H) ÷ 2
put here value and we get
Annual carrying cost = 400 × 1.2 ÷ 2
Annual carrying cost = $240
and
so here Total annual inventory cost = Annual ordering cost + Annual carrying cost .........................7
Total annual inventory cost = $240 + $240)
Total annual inventory cost = $480