Post Card Depot, an large retailer of post cards, orders 9,123,934 post cards per year from its manufacturer. Post Card Depot plans on ordering post card 8 times over the next year. Post Card Depot receives the same number of post cards each time it orders. The carrying cost is $0.22 per post card per year. The ordering cost is $285 per order.
What is the annual total inventory management costs of post card inventory?
Order size = 9123934/8 = 1,140,491.75
Annual ordering cost = 285*8 = $2,280
Annual carrying cost = Average inventory*Carrying cost per unit per year
= (1,140,491.75+0)/2*0.22
= $125,454.0925
Total annual inventory management cost = Ordering cost + Carrying cost
= $127,734.0925
Post Card Depot, an large retailer of post cards, orders 9,123,934 post cards per year from...