Question

Suppose that for a given inventory item holding cost(H) is $ 34 per year per unit in inventory. If we use an order quantity {Q})of 182 , what will annual holding cost be?

Answer 1

The annual holding cost for an inventory item with a holding cost of $34 per year per unit and an order quantity of 182 units is calculated by multiplying the holding cost per unit by half the order quantity, resulting in $3,094.

Step-by-step explanation:

The question involves calculating the annual holding cost for inventory when the holding cost per unit per year is $34, and the order quantity (Q) is 182 units. To calculate the annual holding cost, you multiply the holding cost per unit (H) by the average number of units held in inventory (Q/2), as inventory levels fluctuate between zero and the maximum order quantity throughout the year. In this scenario, the calculation is as follows:

1. Multiply the holding cost per unit by the average inventory level: $34 * (182/2).
2. Calculate the annual holding cost: $34 * 91 = $3,094.

Therefore, the annual holding cost of maintaining an inventory of 182 units is $3,094.