Stocked in company inventory of component parts

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Reference no: EM132123723

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 1,500 of item X, which costs $25 each. Storage costs, which include insurance and cost of capital, amount to $5 per unit of average inventory. Every time an order is placed for more item X, it costs $6.

a. Whenever item X is ordered, what should the order size be? (Round your answer to the nearest whole number.)

Order size

b. What is the annual cost for ordering item X? (Round your answer to 2 decimal places.)

Ordering cost $

c. What is the annual cost for storing item X? (Round your answer to 2 decimal places.)

Holding cost $

Reference no: EM132123723

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