Respuesta :
If the purchasing cost, holding cost, and ordering cost are $1,980, $33, and $2,184. Then the total cost will be $ 4,197.
What is the total cost?
A total cost is the sum of all the costs which are paid by the company.
A food processor purchases corn for use in its products.
The firm uses 550 pounds of corn per week and purchases corn for $0.3 per pound from a supplier.
The cost to hold one pound of corn in inventory for one year is $0.06.
Each time the firm orders corn from the supplier, the firm must pay a $42 order processing charge.
The purchasing cost of the corn (PC) will be
PC = 550 x 0.3 x 12
PC = $ 1,980
The holding cost of the corn (HC) will be
HC = 550 x 0.06
HC = $ 33
The ordering cost of the corn (OC) will be
OC = 42 x 52
OC = 2,184
Then the total cost of the corn (TC) will be
TC = PC + HC + OC
TC = 1980 + 33 + 2184
TC = $ 4,197
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