Question

The following table contains data about the inventory for five items and its unit cost at Jones Corporation.

Item #	Average Unit Inventory	Unit Cost
1	295,000	$	17.00
2	66,000	$	53.00
3	107,000	$	5.00
4	345,000	$	10.00
5	71,000	$	1.00

Suppose Jones Corporation determined that its annual inventory carrying cost = 18 percent. Compute the dollar values for the information in the above table, determine the annual inventory carrying cost for each item, and the total annual inventory carrying cost.

Answer 1

Holding cost or carrying cost is nothing but percentage of inventory value which include taxes, insurance, cost of storage, opportunity cost, depreciation, cost of good damaged, labor cost, utilities cost, etc.

Holding cost per unit a 9 18% of unit cost Total annual inventory Aug. unit x holo carcina cast - inventory & per canit o o aten Aug. unit inventory Unit cost Annual inventory Total anual carrying cost per unit inv. carrying cart 18x17 - $3.06 295,000 * 3:06 = $902 700 ! 295,000 $17.00 100 2 66,000 $53.00 18 53 89.54 6600 o X 9.54 1 = $629,640 100 3 107,000 95.00 18 $0.90 107000 x 0.90 = $ 96,300 100 x 5 74 345,000 $ 10.00 118 x 10 : $ 1.80 $1.er 345000 X 1080 I = $621,000 100 15 71,000 $1.00 $0°18 71000 X 0.18 = $12, 780 lloox