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8 October, 00:38

Firm A's demand for a product is 15 units per month. Its supplier charges an ordering cost of $5 per order and $10 per unit with a 10% discount for orders of 15 units or higher. Firm A incurs a 25% annual holding cost. What is Firm A's annual ordering costs if it orders at a quantity of 28 units?

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  1. 8 October, 00:50
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    Annual ordering cost=$32.142

    Explanation:

    Annual ordering cost = Annual demand/order quantity * ordering cost per order

    Annual demand = 15 * 12 = 180 units

    Kindly note that there are 12 months in year.

    Annual Ordering cost = 180/28 * $5 = $32.142

    Annual ordering cost=$32.142
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