A wholesale company is reviewing its inventory costs for a high volume item which has an annual demand of 72,000 units, with a per unit purchase price of $10. The ordering cost is estimated at $25, and the annual inventory carrying cost for the warehouse is computed at 30% of the price while the in-transit shipping factor is 13%. The in-transit shipping time is 14 days with a per unit transit cost of $1.50. Forecasted average demand is 200 units per day with a standard deviation of the forecast error of 20 units per day. The average order lead time is 16 days with a standard deviation of order lead time of 3 days. A 98% service level is to be maintained. There are 360 days in a year.
What is the Annual Transit Cost for this product?
a. $108,000.00
b. $365,228.56
c. $300.00
d. $1,928,338.51
What is the Total Annual Cost for this product (roughly)?
a. $210,650
b. $189,330
c. $103,280
d. $119,990