The annual demand for the product has been projected at the 2,000 units. This demand is supposed to be constant during the year. The ordering cost is $20 per order, and holding cost is 20 percent of the purchase cost. Currently, the purchase cost is $40 for each unit. There are 250 working days for each year. Whenever an order is placed, it is known that the overall order will arrive on a truck in six days. Currently, the company is ordering 500 units each time an order is placed. Compute the total holding cost for the year by using this policy?
Answer
$400
$2,000
$4,000
$8,000
none of the above