A company uses components at the rate of 15,000 units per year, which are bought in at a cost of $3.90 each from the supplier. The company orders 8,000 units each time it places an order and the average inventory held is 500 units. It costs $30 each time to place an order, regardless of the quantity ordered. The total holding cost is 21% per annum of the average inventory held. Required:- Calculate the total holding cost and total ordering cost?
A company uses components at the rate of 15,000 units per year, which are bought in at a cost of $3.90 each from the supplier. The company orders 8,000 units each time it places an order and the average inventory held is 500 units. It costs $30 each time to place an order, regardless of the quantity ordered. The total holding cost is 21% per annum of the average inventory held. Required:- Calculate the total holding cost and total ordering cost?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
A company uses components at the rate of 15,000 units per year, which
are bought in at a cost of $3.90 each from the supplier. The company
orders 8,000 units each time it places an order and the average
inventory held is 500 units. It costs $30 each time to place an order,
regardless of the quantity ordered.
The total holding cost is 21% per annum of the average inventory held.
Required:-
Calculate the total holding cost and total ordering cost?
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