Mark Achin sells 3,600 electric motors each year.The cost of these is $200 each, and demand is constant throughout the year.The cost of placing an order is $40, while the holding cost is $20 per unit per year.There are 360 working days per year and the lead-time is 5 days.If Mark orders 200 units each time he places an order, what would his total ordering cost be for the year?
A)$2,000
B)$2,720
C)$200
D)$720

Question

Quizplus · Accepted Answer

The total ordering cost is calculated by dividing the annual demand by the order quantity and then multiplying by the cost per order: (3,600 / 200) * $40 = $720.

Mark Achin Sells 3,600 Electric Motors Each Year