Assume that the order quantity is 1000 units,and the holding costs are $5 a unit per year.In this case,______.
A)the average inventory level is 500 units,and the total annual holding costs are $2,500
B)the average inventory level is 1,000 units,and the total annual holding costs are $5,000
C)the average inventory level is 0 units,and the total annual holding costs are $5
D)the average inventory level is 500 units,and the total annual holding costs are $5,000

Question

Quizplus · Accepted Answer

The average inventory level is typically half the order quantity when assuming constant demand and a uniform usage rate over time, making it 500 units in this case. The total annual holding cost is calculated by multiplying the average inventory level by the holding cost per unit, which is $5, resulting in $2,500 ($5 * 500).

Assume That the Order Quantity Is 1000 Units,and the Holding