A company is planning for its financing needs and uses the basic fixed-order-quantity inventory model. Which of the following is the total cost (TC) of the inventory given an annual demand of 10,000, setup cost of $32, a holding cost per unit per year of $4, an EOQ of 400 units, and a cost per unit of inventory of $150?
A) $1,501,600
B) $1,498,200
C) $500,687
D) $499,313
E) None of these choices are correct

Question

Quizplus · Accepted Answer

The total cost (TC) in the EOQ model is calculated as: TC = (D/Q)*S + (Q/2)*H + D*C. Substituting the given values: TC = (10000/400)*32 + (400/2)*4 + 10000*150 = $1,501,600.

A Company Is Planning for Its Financing Needs and Uses