Which of the following is the set of all cost components that make up the fixed-order-quantity total annual cost (TC) function?
A) Annual purchasing cost, annual ordering cost, fixed cost
B) Annual holding cost, annual ordering cost, unit cost
C) Annual holding cost, annual ordering cost, annual purchasing cost
D) Annual lead time cost, annual holding cost, annual purchasing cost
E) Annual unit cost, annual setup cost, annual purchasing cost

Question

Quizplus · Accepted Answer

The fixed-order-quantity total annual cost (TC) function includes the annual holding cost (cost of holding inventory), annual ordering cost (cost of placing orders), and annual purchasing cost (cost of acquiring inventory). Option A includes fixed cost, which is not a cost component included in TC; Option B includes unit cost, which is not a cost component included in the fixed-order-quantity TC function; Option D includes lead time cost, which is not a cost component included in TC; and Option E includes setup cost, which is not a cost component included in the fixed-order-quantity TC function.

Which of the Following Is the Set of All Cost