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Forums › ACCA Forums › ACCA MA Management Accounting Forums › Annual Cost
Need help
A company uses components at the rate of 500 units per month, which are bought in
at a cost of $1.20 each from the supplier. It costs $20 each time to place an order,
regardless of the quantity ordered. The total holding cost is 20 % per annum of the
value of inventory held.
What is the total annual cost?
A $120
B $240
C $7,320
D $7,440
D 7440
Where did u get that question from?
EOQ (Q) = square root of( 2*20*500*12/0.12*1.2) = 1000 components
total annual cost = Purchase cost per unit*demand per anum + ( cost of placing one order*Demand per annum/Q) + (cost og holding oe unit for one year * Q/2)
= 7200(20*6000/1000) + (0.24*1000/2)
= 7200 +120 +120 = 7440
thanks alot