Final answer:
The total stocking cost is calculated by adding the total ordering cost and the total holding cost. The total ordering cost is calculated by dividing the annual demand by the order quantity and then multiplying it by the order cost. The total holding cost is calculated by multiplying the annual demand by the holding cost per unit per year.
The total cost of inventory, considering annual demand, order quantity, holding costs, and order costs, amounts to $2,393.33.
Step-by-step explanation:
The total stocking cost is calculated by adding the total ordering cost and the total holding cost. The total ordering cost is calculated by dividing the annual demand by the order quantity and then multiplying it by the order cost:
Total Ordering Cost = (Annual Demand / Order Quantity) * Order Cost
The total holding cost is calculated by multiplying the annual demand by the holding cost per unit per year:
Total Holding Cost = Annual Demand * Holding Cost per Unit per Year
Finally, the total stocking cost is the sum of the total ordering cost and the total holding cost:
Total Stocking Cost = Total Ordering Cost + Total Holding Cost
Using the given values, we can calculate the total stocking cost:
- Total Ordering Cost = (2000 / 75) * 65 = $1733.33
- Total Holding Cost = 2000 * 0.33 = $660
- Total Stocking Cost = 1733.33 + 660 = $2393.33