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I got the answer for this problem but, I need to ask you a scenario question which is if I get the same problem without ‘Purchase price per unit $25’, how can I find it out? Could you help me with a trick or a formula?
Little Inc. sells kids dress. The demand for this product is 40,000 units a year, at a steady rate. The purchase price of the product is $25 per unit. It costs $20 to place an order, and 40c to hold a unit for a year. Little Inc. uses economic order quantity as its ordering size.
What is the total annual cost of trading in this product? (assume 52 weeks a year)a $1,000,800
b $1,008,400
c $1,004,000
d $1,000,400Answer is option-A.
Thank you.
If you are not given the purchase price, then you cannot be asked for the total annual cost of trading!!! There is obviously no formula for calculating a figure that you are not given.
What you would be asked for instead would be the total inventory costs (which do not include the purchase price).
I do suggest that you watch my free lectures on this. The lectures are a complete free course and cover everything needed to be able to pass the exam well.
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