Post Card Depot, orders 4,431,467 post cards per year from its manufactuer. Post
ID: 2647808 • Letter: P
Question
Post Card Depot, orders 4,431,467 post cards per year from its manufactuer. Post Card Depot plans on ordering post card 15 times over the next year. Post Card Depot receives the same number of post cards each time it orders. The carrying cost is $0.19 per post card per year. The ordering cost is $28.80 per order. What is the Annual Carrying Cost of the post card inventory? I know the answer is $28,065.96, but I don't know how that answer was achieved.
Can you please show formula and how to solve? Thank you!
Explanation / Answer
SOLUTION:
The answer is not $28,065.96. Please find the below,
No.of units = 4,431,467
No. of order to be increased = 15
Ordering Cost = $28.80
Carrying Cost = $0.19
Lets find the Annual Ordering Cost first.
Annual ordering cost = Ordering Cost * No. of order to be increased
Annual ordering cost = $28.80 * 15
Annual ordering cost = $432
Now lets find the Annual Carrying Cost.
Annual Carrying Cost = No.of units * Carrying Cost
Annual Carrying Cost = 4,431,467 * $0.19
Annual Carrying Cost = $841,978.73