Answer:
Explanation:
Monthly Quantity sold = 500 units
Annual demand = 500 x 12 = 6000 units
Cost per order = $100
Carrying cost = 25% = 25% x $100 = 25per unity per year
Holding cost per period = 1/2 x ordered quantity x holding cost
                    = 1/2 x 500 x 25
                    = 12500/2
 Annual Holding cost   =$ 6250
To calculate the number of order we get according to the below mentioned formula
Number of orders = Annual Demand / Order quantity
               = 500 x 12/500
               = 12
To calculate the ordering cost, we use the formula as under
Ordering cost = Number of orders x cost per order
            = 12 x 100
Annual ordering cost= $ 1200
The retail stores' annual holding and ordering cost is $6,250 and $1200 respectively.
Monthly Quantity sold = 500 units
Annual demand = 500 x 12 = 6000 units
Cost per order = $100
Carrying cost = 25% x $100
Carrying cost = $25 per unit per year
Holding cost per period = 1/2 x ordered quantity x holding cost
Holding cost per period = 1/2 x 500 x 25
Holding cost per period = 12500/2
Holding cost per period = $6,250
Number of orders = Annual Demand / Order quantity
Number of orders = 500 x 12/500
Number of orders = 12
Ordering cost = Number of orders x cost per order
Ordering cost = 12 x 100
Ordering cost = $1200
In conclusion, the retail stores' annual holding and ordering cost is $6,250 and $1200 respectively.
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