Question

Firm A's demand for a product is 15 units per month. Its supplier charges an ordering cost of $5 per order and $10 per unit with a 10% discount for orders of 15 units or higher. Firm A incurs a 25% annual holding cost. What is Firm A's annual ordering costs if it orders at a quantity of 28 units? $27.00 $30.00 $31.50 $32.14

Answer 1

32.14

Step-by-step explanation:

Quantity = 28

Demand = 15

Ordering cost = $5

Holding cost = 25%

The question requires us to find firm A's annual ordering cost at this quantity.

We start by multiplying demand by number of months in a year.

15 x 12 = 180

Annual ordering cost = (180/28)*5

= 32.14

Firm A's ordering cost at a quantity of 28 units is therefore $32.14.