The total annual holding cost is obtained by ______.
A)multiplying the average inventory level during the year by the average holding cost
B)multiplying the inventory level at the end of the year by the holding cost per unit per year
C)multiplying the inventory level at the beginning of the year by the holding cost per unit per year
D)multiplying the average inventory level during the year by the holding cost per unit per year

Question

Quizplus · Accepted Answer

The total annual holding cost represents the cost of holding the inventory for the entire year. To calculate this value, we need to multiply the average inventory level during the year by the holding cost per unit per year. This formula takes into account the fluctuation of inventory levels throughout the year and provides an accurate estimate of the total cost of holding inventory. Therefore, option D is the best choice.

The Total Annual Holding Cost Is Obtained by ______