C& a purchases fertilizer for its lawn-care business from a supplier who charges $30 per order and $50 per case. each case consists of five bags of fertilizer. c& a needs 2000 bags of fertilizer a year. c& a's annual holding costs are 30%. what is c& a's holding cost per case per year?

$1.5

Explanation:

Given:

Charges per order = $30

Charges per case = $50

1 case = 5 bags of fertilizers

Number of fertilizers bags needed per year = 2000 bags

Annual holding cost, C₀ = 30%

Now,

Annual demand for cases,  D =

=

= 400 cases

thus,

Annual unit holding cost per case, = 30% of $50 i.e $15

Thus,

Economic Order quantity ( EOQ ) =

on substituting the respective values, we get

EOQ =

or

EOQ = 40

Now,

Annual ordering cost = Ordering cost × Number of orders

= C₀ ×

= $30 ×

= $300

Annual inventory holding cost

= Annual unit inventory holding cost × Average inventory

= ×

= $15 ×  

= $300

Now,

Sum of annual ordering and holding cost per case of fertilizer

= $300 + $300

= $600

Therefore,

Annual ordering and holding cost per case of fertiliser

=

=

= $1.5

rational decision making is a multi-step process for making choices between alternatives. the process of rational decision making favors logic, objectivity, and analysis over subjectivity and insight. the word “rational” in this context does not mean sane or clear-headed as it does in the colloquial sense.

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