Sam\'s Auto Shop services and repairs a particular brand of foreign automobile.

Question

Sam's Auto Shop services and repairs a particular brand of foreign automobile. Sam uses oil filters throughout the year. The shop operates fifty-two weeks per year and weekly demand is 150 filters. Sam estimates that it costs $20 to place an order and his annual holding cost rate is $3 per oil filter. Currently, Sam orders in quantities of 650 filters. Calculate the total annual costs associated with Sam's current ordering policy Total annual costs $ Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

Number of filters in an year = 150*52 = 7800.

If sam orders in quantities of 650 filters, number of orders = 7800/650 = 12

So, Annual cost = (12*20)+(7800*3) = 240+23400 = $23,640

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