Solutions / Discussions
The annual demand is 120,000 units (i.e., 10,000 units x 12 months).
The expected cost per order in 2014 is P5,500 (i.e., P200,000/40 orders x
The total ordering costs based on the 12,000-unit and 24,000-unit order sizes
No. of orders (120,000/12,000)
Cost per order
Total ordering costs
It should be observed that a lower the number of orders means lower
total ordering costs.
The higher the number of orders, the higher the total