Inventories 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

• Damage - When you move inventory, some gets damaged

• Obsolescence - Keep stuff too long; BIUB; style; seasonals; lose it

Givens:

Finished goods inventory = 278,100 cases

Average production cost per case = $4.401

Rate of interest = 6.15% per year

Warehouse cost per month: utilities @ $5900, labor @ $12,320

Insurance = $8400 per year

Damage factor = $.0565 per case per year

Continued

• What is the inventory carrying cost forall the inventory for one (1) month?
• What is the inventory carrying costper case for one (1) month?
• What is the cost of carrying the entire inventoryfor one year?