Question

The BMX company orders 2,500 bicycle tires each that needs inventory and has a total annual demand of 250,000 tires. Each order costs the company $ 3,200. Each tire the company buys is priced at $ 2.50 and the handling cost of each tire is 4%. What are the total inventory costs of BMX?

Answer 1

Information from question

Quantity per order = 2500 tiers

Annual demand= 2,50,000

No. of orders per year = 2,50,000/2500 =100 orders

Cost per order = $ 3200.

Price per tier = $ 2.5.

Handling cost = $2.5*4%= $0.1

Particulars	Calculation	Amount($)
Tier cost	2,50,000*$2.5	6,25,000
ordering cost	100*$3,000	3,00,000
Carrying cost	2,50,000*$0.1	25,000
Total cost	9,50,000

answered by: anonymous