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Chapter 3: 13BP_d (page 222)

Fisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Fisk anticipates sales of 49,000 units per year, an ordering cost of \(8 per order, and carrying costs of \)1.60 per unit.

d. What is the total cost of ordering and carrying inventory?

Short Answer

Expert verified

The total cost of ordering and carrying inventory is $1,120.

Step by step solution

01

Ordering cost of inventory

The ordering cost is $560.

Orderingcost=Numberoforders×Costperorder=70×$8=$560

02

Carrying cost of inventory

The carrying cost is $560.

Carryingcost=Averagecost×Carryingcostperunit=350×$1.60=$560

03

Carrying cost of inventory

The total carrying and ordering cost is $1,680.

Totalcost=Carryingcost+Orderingcost=$560+$560=$1,120

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