Question

Uptown Clothiers, Inc. estimates that it costs $12,500 annually to carry the company's inventory of clothing, shoes and accessories. The costs are: 15% for storage, 8% for interest, and 2% for taxes and insurance. What is the value of the inventory in dollars?

Answer 1

Let X be the value of the inventory in dollars. Then, we can express the costs in terms of X as follows:

- Storage cost: 15% of X = 0.15X

- Interest cost: 8% of X = 0.08X

- Taxes and insurance cost: 2% of X = 0.02X

The total annual inventory cost is the sum of these costs:

Total cost = Storage cost + Interest cost + Taxes and insurance cost

Total cost = 0.15X + 0.08X + 0.02X

Total cost = 0.25X

We know that the total cost is $12,500, so we can set up an equation:

0.25X = $12,500

Solving for X, we get:

X = $50,000

Therefore, the value of the inventory in dollars is $50,000.