Question

Demand for a product is​ 12,000 units per year. Every time an order is​ made, the company must pay​ $15.00 per order. The cost to hold an order in inventory is​ $2.00 per unit per year. Calculate the cost if the company orders​ 3,000 units each time.

Answer 1

Total cost is $24060

Step-by-step explanation:

Total demand per year = 12000 units

Size of one order = 3000 units

Total number of orders = 12000 / 3000 = 4

Per order cost = $15

Per unit cost = $2

Below is the calculation to find the total cost.

Total cost = Number of orders × Per order cost + Total demand per year × Per unit cost

Now insert the values.

Total cost = 4 ×15 + 12000 × 2

Total cost = $24060