A company has collected the following inventory data for an item. What is the total annual cost for this item?
A) 275
B) 450
C) 5,275
D) 5,450

Question

A company has collected the following inventory data for an item. What is the total annual cost for this item? 
A) 275 
B) 450 
C) 5,275 
D) 5,450

Quizplus · Accepted Answer

The total annual cost can be calculated by multiplying the annual demand by the unit cost and adding the annual holding cost. 
Total annual cost = (400 x $10) + (0.2 x $10 x 400) = $4,000 + $800 = $5,275. Therefore, the correct answer is C.

A Company Has Collected the Following Inventory Data for an Item