Question: A merchant sells 40000 hammers each year and demand for the product is even throughout the year. The cost of ordering the hammers is $20 per order and the cost of holding one hammer for a year is $4. The merchant orders the hammer is batches of 1,000 and retains a buffer inventory of 2,000 hammers throughout the year.
What is the combined annual cost of ordering and holding the hammers?
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