Reference no: EM132210875
Inventories - raw materials, finished goods and supplies - have associated carrying costs. These include:
Cost of money invested in inventory cases – assume interest being paid on borrowed funds
Cost of storage - Buildings, equipment, insurance, labor, climate control, counting labor, lighting
Obsolescence – Keep stuff too long; BIUB; style; seasonals; lose it
Given:
Finished goods inventory = 278,963 cases
Average production cost per case = $4.326
Rate of interest = 6.85% per year
Warehouse cost per month: utilities @ $5900, labor @ $12,320
Insurance = $4966 per year
Damage factor = $.0965 per case per year
Questions for you to answer (work in whole dollars):
A) What is the FG inventory carrying cost for one (1) month?
B) What is the inventory carrying cost per case for one (1) month?
C) What is the cost of carrying the entire FG inventory for one year?