SOLUTION: ABC Company sells 5,500 pens per year with a constant demand throughout the year. ABC
purchases the pens at the cost of $300 per unit. Ordering cost for the company is S 100 per
Algebra ->
Customizable Word Problem Solvers
-> Finance
-> SOLUTION: ABC Company sells 5,500 pens per year with a constant demand throughout the year. ABC
purchases the pens at the cost of $300 per unit. Ordering cost for the company is S 100 per
Log On
Question 1178940: ABC Company sells 5,500 pens per year with a constant demand throughout the year. ABC
purchases the pens at the cost of $300 per unit. Ordering cost for the company is S 100 per
order. Holding cost for the company is S 10 per year. Currently the company is ordering the
products in lots of 200 units. What would be the total holding cost for ABC? Answer by CPhill(1959) (Show Source):
You can put this solution on YOUR website! Here's how to calculate the total holding cost for ABC Company:
**1. Calculate the Average Inventory:**
* The average inventory is half of the order quantity.
* Average Inventory = Order Quantity / 2
* Average Inventory = 200 units / 2 = 100 units
**2. Calculate the Total Holding Cost:**
* Total Holding Cost = Average Inventory * Holding Cost per Unit per Year
* Total Holding Cost = 100 units * $10/unit = $1000
**Therefore, the total holding cost for ABC Company is $1000.**
