Carmel Company uses 810 units of a part each year. The cost of placing one order is $10; the cost of carrying one unit in inventory for a year is $4.
-Refer to Carmel Company.Carmel has decided to begin ordering 60 units at a time.What is the average annual carrying cost of Benton's new policy?
A)$5
B)$30
C)$120
D)$180

Question

Quizplus · Accepted Answer

The average inventory level when ordering 60 units at a time is half of that, which is 30 units. The annual carrying cost per unit is $4, so the total annual carrying cost is 30 units * $4/unit = $120.

Carmel Company Uses 810 Units of a Part Each Year