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21 March, 14:32

An auto parts supplier sells a popular brand of batteries to car dealers and auto mechanics. The annual demand is approximately 1,200 batteries. The supplier pays $28 for each battery and sells each for $45. In addition, they estimate that the annual holding cost is 30 percent of the battery's cost. It costs approximately $20 to place an order (managerial and clerical costs). The supplier currently orders 100 batteries per month. What is the approximate yearly inventory cost for the current order quantity

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  1. 21 March, 14:43
    0
    C (75.6) = (R/Q) * K + (Q/2) * h=1200/75.6*20+75.6/2*8.4 = $634.98

    •Sqrt (2KRh) = sqrt (2 * 20 * 1200 * 8.4) = $634.98 42
  2. 21 March, 16:29
    0
    Inventory Cost for Current Order = 660

    Explanation:

    Demand per anum (D) = 1200

    Price of Auto Parts (P) = 28

    Holding Cost (H) = Battery Cost * 30% = 28 * 30% = 8.4

    Order Cost (S) = 20

    Quantity (Q) = 100

    To Compute the Inventory Cost;

    Inventory Cost for Current Order = [ (Holding Cost * Quantity) / 2] + [ (Demand * Ordering Cost) / Quantity]

    Inventory Cost for Current Order = [ (8.4 * 100) / 2] + [ (1200 * 20) / 100]

    Inventory Cost for Current Order = [840 / 2] + [24,000 / 100]

    Inventory Cost for Current Order = 420 + 240

    Inventory Cost for Current Order = 660
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