Expected annual usage of a particular raw material is 180,000 units,and standard order size is 12,000 units.The invoice cost of each unit is $300,and the cost to place one purchase order is $80.Assuming the company does not maintain safety stock,the average inventory is:
A)10,000 units.
B)7,500 units.
C)15,000 units.
D)6,000 units.

Question

Quizplus · Accepted Answer

The average inventory is calculated as half of the order size. Therefore, 12,000 units / 2 = 6,000 units.

Expected Annual Usage of a Particular Raw Material Is 180,000