If Annual Demand Is 35,000 Units, the Ordering Cost Is

question 29

Multiple Choice

If annual demand is 35,000 units, the ordering cost is $50 per order, and the holding cost is $0.65 per unit per year, which of the following is the optimal order quantity using the fixed-order-quantity model?

• A) 5,060
• B) 2,320
• C) 2,133
• D) 2,004
• E) 1,866

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Definitions:

Present Value

The contemporary equivalence of a series of future cash inflows or a single future sum, adjusted by a given rate of return.

Perpetuity

A financial instrument that pays a fixed amount of interest indefinitely, with no maturity date.

Continuously Compounded

Refers to the mathematical limit where the frequency of compounding interest reaches infinity over a defined period, leading to the maximal possible growth.

Rate Of Return

The reward or penalty on an investment concluded over a chosen length of time, denoted as a percentage of the investment's initial outlay.