Question

Abey​ Kuruvilla, of Parkside​ Plumbing, uses 1 comma 200 of a certain spare part that costs ​$24 for each​ order, with an annual holding cost of ​$24. ​a) Calculate the total cost for order sizes of​ 25, 40,​ 50, 60, and 100 ​(round your responses to two decimal​ places).

Answer 1

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