R. C. Barker makes purchasing decisions for his company. One product that he buys costs $50 per unit when the order quantity is
less than 500. When the quantity ordered is 500 or more, the price per unit drops to $48. The ordering cost is $30 per order and the annual demand is 7,500 units. The holding cost is 10 percent of the purchase cost. If R. C. orders 500 units each time he places an order, what would the total annual holding cost be
$1,200 The total annual holding cost is calculated by multiplying the average number of units in inventory by the annual holding cost per unit. The average number of units is 500 units / 2 = 250 units, and the annual holding cost per unit is $48 x 10% = $4.8. Therefore, the total annual holding cost equals $4.80 x 250 units = $1,200. This includes all costs related to maintaining a specific inventory level, such as warehouse rent, utilities, salaries for warehouse staff, insurance, etc.
The conclusion for the statement is "FALSE." Sales Management Systems are designed to forecast customer demands, automate inventory management, and enhance revenue growth while implementing effective marketing strategies, thus indicating the statement is indeed NOT TRUE.
