Exercise 20.6 (Algorithmic)

Ordering and Carrying Costs

Ottis, Inc., uses 693,360 plastic housing units each year in its production of paper shredders. The cost of placing an order is $30. The cost of holding one unit of inventory for one year is $19. Currently, Ottis places 162 orders of 4,280 plastic housing units per year.

Required:

1. Compute the annual ordering cost.

$

2. Compute the annual carrying cost.

$

3. Compute the cost of Ottis's current inventory policy.

$