Sullivan, Inc., uses 40,000 plastic housing units each year in its production of paper shredders. The cost

Question:

Sullivan, Inc., uses 40,000 plastic housing units each year in its production of paper shredders. The cost of placing an order is $40. The cost of holding one unit of inventory for one year is $5. Currently, Sullivan places eight orders of 5,000 plastic housing units per year.
Required:
1. Compute the annual ordering cost.
2. Compute the annual carrying cost.
3. Compute the cost of Sullivan’s current inventory policy. Is this the minimum cost? Why or why not?