Product has an ANNUAL demand of 1,843 units. We purchase them from the supplier at price 5 . If wo don't use them right away, we pay to store them, insure them, and of course we have the invested money to consider. Our finance and accounting teams have informed us that the annual rate of holding cost is . Therefore, the annual holding cost per unit is . Obviously we'd rather hold no inventory at all, but we also know that every time we place an order we pay 45 for shipping and the related administrative costs to process the order - often called "Shipping & Handling". If we order units each time we order, what is the expected annual combined cost which includes transaction costs, holding costs, and the purchase cost?

Answer rating: 100% (QA)

To calculate the expected annual combined cost we need to consider the purchase cost holding cost an... View the full answer