Natalie's Cabinets makes cabinets at an average cost of $2,000.Last year, Natalie sold 5,000 units of the cabinets and had an annual turnover rate of 4 times.Natalie has estimated her inventory carrying cost to be 25 percent.What was Natalie's annual inventory carrying cost?

Question

Quizplus · Accepted Answer

Natalie's annual inventory carrying cost is 25% of the average inventory value. The average inventory value is half of the annual sales value, which is 5,000 units * $2,000/unit * 4 = $40,000,000. Therefore, the annual inventory carrying cost is $40,000,000 * 0.25 = $10,000,000.

Natalie's Cabinets Makes Cabinets at an Average Cost of $2,000