To calculate the cost of holding stock for a year, we need to determine the carrying cost per unit and multiply it by the number of units being held in stock.
First, let's calculate the economic order quantity (EOQ) for the computing systems:
EOQ = sqrt((2DS)/H)
where
D = annual demand = 25 systems
S = setup cost per order = $6,000
H = holding cost per unit per year = ?
Assuming a holding cost of 20% of the unit cost, we have:
H = 20% of unit cost = 0.20*$6,000/46 = $24.78 per unit per year
So, the EOQ is:
EOQ = sqrt((225$6,000)/$24.78) = 46.17 (rounded to 46)
Since the EOQ is 46 systems, we need to order 46 systems at a time to minimize our total inventory costs.
The cost of holding stock for a year is then:
Cost of holding stock = number of units held in stock * holding cost per unit per year
= 46 * $24.78
= $1,139.88
Therefore, it will cost your company $1,139.88 to hold 46 computing systems in stock for a year.