C& a sells 600 bottles of a dietary supplement per week at $100 per bottle. the supplement is ordered from a supplier who charges c& a $30 per order and $50 per bottle. c& a's annual holding cost percentage is 40%. assume c& a operates 50 weeks in a year. what is c& a's total ordering and holding cost per year if c& a orders 500 bottles at a time?

a. $10,036
b. $5036
c. $11,800
d. $6800

D. $6800

Explanation:

Annual demand = 600 × 50 weeks = 30,000 bottles

Carrying cost or holding cost = $50 × 40% = $20

The economic order quantity = 500 bottles

The number of orders would be equal to

= Annual demand ÷ economic order quantity

= 30,000 ÷ 500

= 60 orders

The average inventory would equal to

= Economic order quantity ÷ 2

= 500 bottles ÷ 2

= 250 bottles

The total cost of ordering cost and carrying cost equals to

Ordering cost = Number of orders × ordering cost per order

= 60 orders × $30

= $1,800

Carrying cost = average inventory × carrying cost per unit

= 250 bottles × $20

= $5,000

So, the total would be  

= $5,000 + $1,800

= $6,800

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