Could you please explain how to calculate the cost of holding in the following question.
A company has demand for 50,000 units p.a.
They produce their own units at a cost of $30 per unit, and are capable of producing at rate of 500,000 units p.a.
Machine set-up costs are $200 for each batch.
Stock holding costs are 10% p.a. of stock value.
Calculate the Economic Batch Quantity.
the answer is 2722 units
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7y ago#1The holding cost is 10% of stock value and is therefore 10% x $30 = $3.
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