A company uses components at the rate of 6,000 units per year, which are bought in at a cost of $1.20 each from the supplier. The company orders 1,000 units each time it places an order and the average inventory held is 500 units. It costs $20 each time to place an order, regardless of the quantity ordered. The total holding cost is 20% per annum of the average inventory held. Required Calculate the annual ordering and holding costs Total annual cost = PD + (Cox D/Q) + (Ch Q/2)

A company uses components at the rate of 6,000 units per year, which are bought in at a cost of $1.20 each from the supplier. The company orders 1,000 units each time it places an order and the average inventory held is 500 units. It costs $20 each time to place an order, regardless of the quantity ordered. The total holding cost is 20% per annum of the average inventory held. Required Calculate the annual ordering and holding costs Total annual cost =PD+(CoD/Q)+(ChQ/2)