LLB Sells 86,500 Units a Year

question 346

Multiple Choice

L.L.B. sells 86,500 units a year. The average order is for 6,000 units. Each new order arrives just as the old order is being depleted. The company does not hold any safety stock. Each order incurs a fixed cost of $48. The carrying cost of inventory is $2.21 per unit per year. What is the total cost of inventory for one year?

• A) $7,239
• B) $7,322
• C) $9,108
• D) $13,952
• E) $14,021

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Definitions:

Moving Average

A statistical method used to analyze data points by creating a series of averages of different subsets of the full data set.

Excel Function

A predefined formula in Microsoft Excel that performs calculations using specific values in a particular order.

Mean Absolute Deviation

A statistical measure that quantifies the average absolute deviation of data points from their mean, used to gauge variability within a dataset.

Forecast Error

The difference between the actual value and the value predicted by a forecasting model.