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## Q. 12.EX.5

COMPUTING COMBINED COST OF ORDERING AND HOLDING. Sharp, Inc. (from Examples 3 and 4) wants to determine the combined annual ordering and holding costs.
APPROACH $\blacktriangleright$ Apply Equation (12-5), using the data in Example 3.

$TC = \frac{D}{Q}S + \frac{Q}{2}H$                 (12-5)

## Verified Solution

SOLUTION $\blacktriangleright$
$TC = \frac{D}{Q}S + \frac{Q}{2}H = \frac{1,000}{200}(\ 10) + \frac{200}{2}(\ .50)$ = (5)($10) + (100)($ .50) = $50 +$50 = $100 INSIGHT $\blacktriangleright$ These are the annual setup and holding costs. The$100 total does not include the actual cost of goods. Notice that in the EOQ model, holding costs always equal setup (order) costs.

LEARNING EXERCISE $\blacktriangleright$ Find the total annual cost if D = 1,200 units in Example 3. [Answer: \$109.54.]
RELATED PROBLEMS $\blacktriangleright$ 12.11, 12.14, 12.15, 12.16 (12.33b,c; 12.35e; 12.36a,b are available in MyOMLab)