Expected annual usage of a particular raw material is 1,200,000 units,and standard order size is 10,000 units.The invoice cost of each unit is $145,and the cost to place one purchase order is $105.The estimated annual order cost is:
A)$12,000.
B)$17,400.
C)$12,600.
D)$800,000.

Question

Quizplus · Accepted Answer

First, we need to calculate the number of orders placed per year:
1200000 / 10000 = 120 orders per year

Then, we can calculate the total cost to place all these orders:
120 * 105 = $12,600

Therefore, the estimated annual order cost is $12,600. Choice C is the correct answer.

Expected Annual Usage of a Particular Raw Material Is 1,200,000