Question

A company orders a particular raw material in order quantities of 250 units. No safety stack is held, the stock holding cost is GHc 3.00 per unit per annum and the annual demand of 2,500 units. What is the total annual stock holding cost of the material?

Answer 1

Given Information,

1. A company orders a particular raw material in order quantities of 250 units.
2. No safety stack is held, the stock holding cost is GHc 3.00 per unit per annum and
3. the annual demand of 2,500 units.

Calculation of Annual stock holding cost of the material;

Total annual stock holding cost of the material=Average Inventory Level X Holding cost per unit per year

=(Order Quantity /2) X Holding cost per unit per year

=(250 units / 2) X GHc 3.00 per unit per annum

=125 units X GHc 3.00

=GHc 375

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