a company carries an $630,000 inventory. The company estimates the annual cost of carrying the inventory at 35% of the ihe inventory value. What is the approximate ANNUAL cost of carring the inventory?
0.35 * 630,000 = ?
My answer was 220,500 but it keeps saying I am wrong.
Perhaps you should add the cost to the value of the inventory.
Maybe it want's you to subtract have you tried 409,500?
Why subtract?
I have no idea Ms. Sue. It has helped me before in problems, I do not know the reasoning behind it, but it has helped before.
To calculate the annual cost of carrying the inventory, you need to multiply the inventory value by the percentage of the inventory cost.
Given:
Inventory value: $630,000
Cost of carrying inventory: 35% of the inventory value
Step 1: Calculate the cost of carrying the inventory.
Cost of carrying the inventory = Inventory value × Cost percentage
Substituting the given values:
Cost of carrying the inventory = $630,000 × 35%
Step 2: Convert the percentage into a decimal.
35% = 35/100 = 0.35
Substituting the decimal value:
Cost of carrying the inventory = $630,000 × 0.35
Step 3: Calculate the approximate annual cost.
Cost of carrying the inventory = $220,500
Therefore, the approximate ANNUAL cost of carrying the inventory is $220,500.