Specialty Manufacturing requires 5400 gadgets per year for production. The firm decides to order 120 gadgets at a time. The costs of ordering are $50 per order and carrying costs per gadget are $2. Annual ordering costs are:

Question

Quizplus · Accepted Answer

Annual ordering costs are calculated by dividing the annual demand by the order quantity and then multiplying by the cost per order. Here, it's (5400 gadgets/year) / (120 gadgets/order) * ($50/order) = 45 orders/year * $50/order = $2250/year.

Specialty Manufacturing Requires 5400 Gadgets Per Year for Production