Question

Andre Candess manages an office supply store. One product in the store is computer paper. Andre knows that 10,000 boxes will be sold this year at a constant rate throughout the year. There are 250 working days per year and the lead-time is 3 days. The cost of placing an order is $30, while the holding cost is $15 per box per year. If he orders in batches of 500 boxes at a time, what is his annual holding cost

Answer 1

$3,750

Step-by-step explanation:

The computation of the annual holding cost is shown below:

= Economic order quantity ÷ 2 × holding cost per box per year

where,

Economic order quantity = 500 boxes

And, the holding cost per box per year is $15

Now putting the values to the above formula

The annual holding cost is

= 500 boxes ÷ 2 × $15 per box per year

= 250 boxes × $15 per box per year

= $3,750