Aberwald Corporation Expects to Order 126,000 Memory Chips for Inventory

Multiple Choice

Aberwald Corporation expects to order 126,000 memory chips for inventory during the coming year, and it will use this inventory at a constant rate. Fixed ordering costs are $200 per order; the purchase price per chip is $25; and the firm's inventory carrying costs is equal to 20 percent of the purchase price. (Assume a 360-day year.)
-If Aberwald holds a safety stock equal to a 30-day supply of chips, what is its average inventory level?

A) 12,088
B) 3,175
C) 15,750
D) 13,675
E) 8,124