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A manufacturing company uses 25,000 components at an even rate during a year. Each order
placed with the supplier of the components is for 2,000 components. The annual cost of holding one component in inventory
is $2. Ordering cost is $150. Purchase cost is $5 per unit
What is the total annual inventory cost of the component?The ans given is $128875,but i cant find the ans
The question says that they order 2,000 each time.
Therefore the reorder cost is 25,000/2,000 x $150 = 1,875 p.a.
The holding cost is 2,000/2 x $2 = $2,000 p.a.
The purchases cost is 25,000 x $5 = $125,000The total cost is therefore $128,875
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