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    Inventory-Ordering Cost

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    Mr. Paul sells 3600 electric motors each year. The cost of these motors is $200 each, and demand is constant throughout the year. The cost of placing an order is $40, and the holding cost is $20 per unit per year. There are 360 working days per year and the lead time is five days. If Mr. Paul orders 200 units each time he places an order, what would be his total ordering cost be for the year?

    a. $2,000
    b. $2,700
    c. $200
    d. $720
    e. none of the above

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    Solution Summary

    The solution calculates ordering cost for inventory.