llaiking lime: 13 minutes, 59 seconds. ort Question Completion Status Less than

Question

llaiking lime: 13 minutes, 59 seconds. ort Question Completion Status Less than halif of the time remans A Moving to another question will save this response. Question 1 of 5 Question 1 Viajes Redondo is a wholesale distributor of bicycles. The company management is currently reviewing the inventory 5 points Saved policy for one popular model that is seling at the annual cost of the capital tied up in inventory is 15 percent of the value e cost for placing an order for this model from the manufacturer is $1,000 and the purchase price is $400 per bicycle. The t (based on purchase price) of these bicycles. The additional cost of storing the bicycles- including leasing warehouse space, insurance, taxes, and s ? $17,320 O $21.368 O $30 258 O $34,641 Question 1 of 5 Moving to another question will save this response

Explanation / Answer

D = annual demand = $500 x 12 = $6,000
S = fixed ordering cost = $1,000
H = Carrying cost per unit per annum = 15% x Purchase cost + additional cost = 15% x $400 + $40 = $100

EOQ = (2.D.S / H)1/2 = SQRT(2*6000*1000 / 100) = 346 units

Total ordering cost = (D / EOQ) x S = (6000 / 346) x 1000 = $17341

Total carrying cost = (EOQ / 2) x H = (346 / 2) x 100 = $17300

So, total variable inventory cost = $17341 + $17300 = $34,641

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