Inventory cost at Tech Co. is 35 percent per year. What is the per unit inventory cost for an MP3 player sold at $50? Assume that the margin corresponds to the retailer's average margin.
To find the per unit inventory cost for an MP3 player, you'll need to calculate the inventory carrying cost.
The carrying cost is a percentage of the inventory value and is typically based on the cost of holding the inventory for a specific period, usually a year. For Tech Co., the inventory cost is 35 percent per year.
Here's how you can calculate the per unit inventory cost:
Step 1: Calculate the inventory value
The inventory value is the cost of one unit of the MP3 player. Since it is sold at $50, the inventory value is $50.
Step 2: Calculate the carrying cost
Multiply the inventory value by the inventory cost rate. In this case, multiply $50 by 0.35 (35 percent).
Carrying cost per unit = $50 x 0.35 = $17.50
Therefore, the per unit inventory cost for an MP3 player at Tech Co. is $17.50.