Cost of Prediction Error-Economic Order Quantity Model: Frozen Molecules, a manufacturer of biomedical tests, estimated the following components for determining economic order quantities for a certain monoclonal antibody test:

Based on this information, the company ordered in lots of 17,664 units. At the end of the year, Frozen Molecules' accountant reported that due to changes in regulations concerning the preparation of these tests, a special license costing $1,000 had to be obtained for each order of this component. The regulations were in place at the start of the year, but the cost of the license had not been included in the analysis.

Required: What is the cost of prediction error?

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Annual demand Storage cost per unit Cost to place an order 200,000 $5.00 $3,900.00