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A hardware store sells 44 boxes of tools per week. The cost for box is $86. The maintenance cost per box per month is $50.00. The cost to place an order is $150. What is the annual purchasing cost?
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Answered! A hardware store sells 44 boxes of tools per week. The cost for box is $86. The maintenance cost per box per month…
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Expert Answer
| Weekly Demand, d | 44 | boxes |
| Annual Demand, D | 2288 | (52 weeks per year) |
| cost/box, p | $ 86 | |
| carrying cost per box, Cc | $ 50 | per month |
| ordering cost, Co | $ 150 | |
| EOQ = sqrt (2*Co*D/Cc) | ||
| EOQ | 117 | boxes |
| Total cost=p*D+Co(D/EOQ)+Cc(EOQ/2) | ||
| Total cost= | $ 2,02,626.33 | |
| Annual Purchasing cost = purchase unit price * annual demand = p*D | ||
| annual purchasing cost | $ 1,96,768 | |
