Assume that ABC Power Tools assembles industrial tools and handheld tools for the construction industry. Item 1 is a heavy-duty band saw that is assembled at the plant and shipped to an ABC distribution center for storage, waiting for an order to be placed. The table below summarizes the cost of holding Item 1 in storage for a one-year time period.

Cost Category Cost $

COGS 315

Inbound Freight 25

Labor/unit 10

Labor/month 0.5

Space/unit/month 1.5

Insurance/unit/year 1.5

Interest/unit/year. 15%

Taxes/year. 2%

Loss and damage/year. 1%

Obsolescene/year. 1%

A) Compute the total inventory carrying cost of Item 1 for one year. State your answer in both dollar amounts as well as a percentage.

b) If ABC Power Tools sells Item 1 to its customers at $360 a unit, what should the minimum inventory turns be in order to make a profit?