C&A sells 600 bottles of a dietary supplement per week at $100 per bottle. The supplement is ordered from a supplier who charges C&A $30 per order and $50 per bottle. C&A's annual holding cost percentage is 40%. Assume C&A operates 50 weeks in a year. What is C&A's total ordering and holding cost per year if C&A orders 500 bottles at a time?

A. $10,036

B. $5036

C. $11,800

D. $6800

D. $6800

Explanation:

Annual demand = 600 * 50 weeks = 30,000 bottles

Carrying cost or holding cost = $50 * 40% = $20

The economic order quantity = 500 bottles

The number of orders would be equal to

= Annual demand : economic order quantity

= 30,000 : 500

= 60 orders

The average inventory would equal to

= Economic order quantity : 2

= 500 bottles : 2

= 250 bottles

The total cost of ordering cost and carrying cost equals to

Ordering cost = Number of orders * ordering cost per order

= 60 orders * $30

= $1,800

Carrying cost = average inventory * carrying cost per unit

= 250 bottles * $20

= $5,000

So, the total would be

= $5,000 + $1,800

= $6,800