Question

An auto parts supplier sells a popular brand of batteries to car dealers and auto mechanics. The annual demand is approximately 1,200 batteries. The supplier pays $28 for each battery and sells each for $45. In addition, they estimate that the annual holding cost is 30 percent of the battery's cost. It costs approximately $20 to place an order (managerial and clerical costs). The supplier currently orders 100 batteries per month. What is the approximate yearly inventory cost for the current order quantity

Answer 1

Inventory Cost for Current Order = 660

Step-by-step explanation:

Demand per anum (D) = 1200

Price of Auto Parts (P) = 28

Holding Cost (H) = Battery Cost × 30% = 28 × 30% = 8.4

Order Cost (S) = 20

Quantity (Q) = 100

To Compute the Inventory Cost;

Inventory Cost for Current Order = [(Holding Cost × Quantity) / 2] + [(Demand × Ordering Cost) / Quantity]

Inventory Cost for Current Order = [(8.4 × 100) / 2] + [(1200 × 20) / 100]

Inventory Cost for Current Order = [840 / 2] + [24,000 / 100]

Inventory Cost for Current Order = 420 + 240

Inventory Cost for Current Order = 660

Answer 2

Step-by-step explanation:

C(75.6) = (R/Q)*K+(Q/2)*h=1200/75.6*20+75.6/2*8.4 = $634.98

•Sqrt(2KRh) = sqrt(2 * 20 * 1200 * 8.4) = $634.98 42