Fiber Technology, Inc., manufactures glass fibers used in the communications industry. The company's materials and parts manager is currently revising the inventory policy for XL-20, one of the chemicals used in the production process. The chemical is purchased in 10-pound canisters for $102 each. The firm uses 5,400 canisters per year. The controller estimates that it costs $157 to place and receive a typical order of XL-20. The annual cost of storing XL-20 is $5.00 per canister.

Required:

1. Prepare table showing the total annual cost of ordering and storing XL-20 for each of the following order quantities: 450, 900, and 1,800 canisters.

4509001800

Number of orders

Ordering Cost

Average Inventory

Holding Costs

Total Annual Costs