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Rate of holding cost per unit

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Reference no: EM133364605

The annual demand for the Savonera bar soap, manufactured by Mellow Cosmetics Company, is 50,000 soap bars.

The cost of a single soap bar is $2.50.

The rate of holding cost per unit per year, which includes opportunity cost of investment and deterioration of a soap bar when in storage, is 10% of the cost of the soap bar.

The cost of setting up machinery for making a batch of the Savonera soap bar, which includes changing the materials and tools, and wastage of initial test quantities, is $40 per setup.

The company currently uses an arbitrary batch size of 6,000 for making Savonera bars of soap.

Based on this batch size and the information provided earlier, please calculate and report the annual inventory holding (carrying) cost for Mellow Cosmetics Company.

Based on the arbitrary batch size of 6,000 bars of Savonera soap and the information provided earlier, please calculate and report the total annual cost of setups for Mellow Cosmetics Company.

Reference no: EM133364605

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