Torque Manufacturing forecasts that its production will require 600,000 tons of bauxite over its planning period....

Torque Manufacturing forecasts that its production will require 600,000 tons of bauxite over its planning period. Demand for Torque's products is stable over time. Ordering costs amount to an average of $15.00 per order. Holding costs are estimated at $1.25 per ton of bauxite. If Torque uses an inventory quantity of 3,000 tons, what will be the total annual cost of inventory?

The answer is $4,875 but I don't know how they got it. Can anyone help?

Expert Solution

jeff jeffy answered 4 months ago

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