Given an Economic Order Quantity (EOQ) of 600 units, an annual demand of 25,000 units, an ordering cost of $40 per order, and a holding cost of $1.50 per unit per year, calculate the total annual inventory cost.Question 6Answera.$2,117b.$11,500c.$3,000d.$3,600

To calculate the total annual inventory cost, we need to consider both the ordering cost and the holding cost.

1. First, calculate the annual ordering cost: The annual ordering cost is the number of orders placed per year multiplied by the cost per order. The number of orders per year is the annual demand divided by the EOQ. So, the annual ordering cost = (Annual demand / EOQ) * Cost per order = (25,000 units / 600 units) * $40 per order = 41.67 orders *$40 per order = $1,666.67

2. Next, calculate the annual holding cost: The annual holding cost is the average inventory level multiplied by the holding cost per unit per year. The average inventory level is EOQ/2. So, the annual holding cost = (EOQ / 2) * Holding cost per unit per year = (600 units / 2) * $1.50 per unit per year = 300 units *$1.50 per unit per year = $450

3. Finally, add the annual ordering cost and the annual holding cost to get the total annual inventory cost: Total annual inventory cost = Annual ordering cost + Annual holding cost = $1,666.67 +$450 = $2,116.67

So, the closest answer is a. $2,117.