Ready Tees,an online retailer of t-shirts,orders 100,000 t-shirts per year from its manufacturer.Ready will order t-shirts 12 times over the next year.Ready receives the same number of t-shirts each time it orders.The carrying cost is $0.10 per shirt per year.What is the annual carrying cost of the t-shirt inventory (rounded to the nearest dollar)?

Question

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The annual carrying cost of the t-shirt inventory is $417. This is because Ready Tees orders 100,000 t-shirts per year, and receives the same number of t-shirts each time it orders. The carrying cost is $0.10 per shirt per year, so the annual carrying cost is $0.10 * 100,000 = $10,000. However, Ready Tees orders t-shirts 12 times over the next year, so the average inventory level is 100,000 / 12 = 8,333 t-shirts. The annual carrying cost is therefore $0.10 * 8,333 = $833.33, or $417 rounded to the nearest dollar.

Ready Tees,an Online Retailer of T-Shirts,orders 100,000 T-Shirts Per Year