Planning Ahead Inventory is an important part of many businesses. Can you think of problems that might arise from having too much or too little of a product in stock?

Lesson Objective Calculate the annual cost of carrying inventory. Content Vocabulary carrying inventory Maintaining adequate goods to meet production or sales needs.

Steel Facilitators estimates the annual cost of maintaining the inventory to be 25 percent of the value of the inventory. This year the company plans to maintain an inventory totaling $500,000 in value. What amount should be set as the estimated cost of carrying the inventory for the year? Example 1

Step: Find the annual cost of carrying inventory. Inventory Value × Percent $500,000 × 25% = $125,000 Example 1 Answer

Find the annual cost of carrying an inventory. Inventory value: $2, Percent: 26.5% Practice 1

$ Practice 1 Answer