Question

Given that inventory valued at full cost equals $10.3 million, variable cost of the inventory is 70.6% of the full cost, and the inventory carrying cost is 30%, then the cost of carrying the inventory investment for one year is (your answer must be accurate to the nearest dollar) ______

Answer 1

$21 million

Step-by-step explanation:

Full cost = $10.3 million

Variable cost = 70.6% of full cost = 0.706 × $10.3 million = $7.2718 million

Inventory cost = 30% of full cost = 0.3 × $10.3 million = $3.09 million

Annual cost of carrying inventory investment = full cost + variable cost + inventory cost = $10.3 million + $7.2718 million + $3.09 million = $20.6618 million = $21 million (to the nearest dollar)