2B5W PAINT CORPORATION EXPECTS TO USE 48,000 GALLONS OF PAINT PER YEA...

165.

CSO: 2B5e

LOS: 2B5w

Paint Corporation expects to use 48,000 gallons of paint per year costing $12 per gallon.

Inventory carrying cost is equal to 20% of the purchase price. The company uses its

inventory at a constant rate. The lead time for placing the order is 3 days, and Paint

Corporation holds 2,400 gallons of paint as safety stock. If the company orders 2,000

gallons of paint per order, what is the cost of carrying inventory?

a.

$2,400.

b.

$5,280.

c.

$5,760.

d.

$8,160.