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Item X is a standard item stocked in a company's inventory of component parts. Each year the firm, on a random basis, uses about 1,800 of item X, which costs $25 each. Storage costs, which include insurance and cost of capital, amount to $14 per unit of average inventory. Every time an order is placed for more item X, it costs $18.   What is the annual cost for ordering item X?

Item X is a standard item stocked in a company's inventory of component parts. Each year the firm, on a random basis, uses about 1,800 of item X, which costs $25 each. Storage costs, which include insurance and cost of capital, amount to $14 per unit of average inventory. Every time an order is placed for more item X, it costs $18.   What is the annual cost for ordering item X?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Item X is a standard item stocked in a company's inventory of component parts. Each year the firm, on a random basis, uses about 1,800 of item X, which costs $25 each. Storage costs, which include insurance and cost of capital, amount to $14 per unit of average inventory. Every time an order is placed for more item X, it costs $18.

 

What is the annual cost for ordering item X? 

 

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