Question: A stonecutter uses about 1 6 , 5 0 0 pounds of stone each week. The stonecutter estimates their holding cost to be 3 3

A stonecutter uses about 16,500 pounds of stone each week. The stonecutter estimates their holding cost to be 33% per year. A supplier has offered the stonecutter two options. Option 1 is to purchase stone in lots of 35,000 pounds (truckload). The price per pound for option 1 is $0.51 per pound. Option 2 is to have stone delivered by rail. The cost per pound for option 2 would be $0.39 per pound. Deliveries by rail will include 150,000 pounds of stone. In either case, the supplier will charge the firm a fixed fee of $325 per delivery.
What is the total annual (52 week) holding and ordering cost of option 2?

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