What is the annual fixed ordering cost

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Reference no: EM133526168

Item X is a standard item stocked in a company's inventory of component parts. Each year the firm, uses exactly 2000 of item X. The fixed ordering cost is $10 per order, and the variable cost is 6 dollars per unit ordered. Storage cost, which includes insurance and cost of capital, amounts to $0.55 per unit of average inventory per year. What should be the optimal order size, i.e., economic order quantity?

If Item X is ordered whenever the inventory hits zero, and the order quantity is 277 each time an order is placed, what is the annual fixed ordering cost that Complete Computer incurs in one year?

Reference no: EM133526168

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