ENTREPRENEURIAL OPERATIONS
INVENTORY MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Given the following percentage costs of carrying inventory, calculate the annual carrying cost if the average inventory is IDR1 million. Capital costs are 10%, storage costs are 6%, and risk costs are 7%.
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IDR230, 000
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IDR100, 000
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IDR200, 000
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IDR250, 000
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Explanation:
Detailed explanation-1: -Holding Cost is fixed over the year. It represents warehouse space, with services such as refrigeration or insurance or security. It also includes the interest cost, which should be set to the “risk-free opportunity-cost” rate. The rate of demand is constant over the year.
Detailed explanation-2: -Inventory carrying costs can be sorted into four categories: capital costs, storage costs, service costs and inventory risk costs. Capital expenditures are monies spent on products and any interest and fees incurred if the company took out a loan to pay for the goods.
There is 1 question to complete.