An auto parts supplier sells a popular brand of batteries to car dealers and auto mechanics. The annual demand is approximately 1,200 batteries. The supplier pays $28 for each battery and sells each for $45. In addition, they estimate that the annual holding cost is 30 percent of the battery's cost. It costs approximately $20 to place an order (managerial and clerical costs). The supplier currently orders 100 batteries per month. What is the approximate yearly inventory cost for the current order quantity

Inventory Cost for Current Order = 660

Explanation:

Demand per anum (D) = 1200

Price of Auto Parts (P) = 28

Holding Cost (H) = Battery Cost * 30% = 28 * 30% = 8.4

Order Cost (S) = 20

Quantity (Q) = 100

To Compute the Inventory Cost;

Inventory Cost for Current Order = [ (Holding Cost * Quantity) / 2] + [ (Demand * Ordering Cost) / Quantity]

Inventory Cost for Current Order = [ (8.4 * 100) / 2] + [ (1200 * 20) / 100]

Inventory Cost for Current Order = [840 / 2] + [24,000 / 100]

Inventory Cost for Current Order = 420 + 240

Inventory Cost for Current Order = 660

C (75.6) = (R/Q) * K + (Q/2) * h=1200/75.6*20+75.6/2*8.4 = $634.98

•Sqrt (2KRh) = sqrt (2 * 20 * 1200 * 8.4) = $634.98 42