Item X is a standard item stocked In a company\'s inventory of component parts.
ID: 2746675 • Letter: I
Question
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 1,600 of item X. which costs $25 each Storage costs, which include insurance and cost of capital, amount to $8 per unit of average inventory Every time an order is placed for more item X, It costs $16. Whenever item X is ordered, what should the order size be? (Round your answer to the nearest whole number.) What is the annual cost for ordering item X? (Round your answer to 2 decimal places.) What is Che annual cost for storing item X? (Round your answer to 2 decimal places.)Explanation / Answer
D=1600 units per year
C=$25 per unit
H=$8 per unit per year
S=$16 per order
A=whenever item X is ordered, what should the order size be?
=2(1600)(16)/8
=71 units
B=what is the annual cost for ordering item X?
Annual ordering cost = Q D S = (1600)(16)/71 = $360.56
C=What is the annual cost for storing item X?
Annual holding cost
=(71)(8)/2
=$284
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