Question

Post Card Depot, an large retailer of post cards, orders 3,099,310 post cards per year from...

Post Card Depot, an large retailer of post cards, orders 3,099,310 post cards per year from its manufacturer. Post Card Depot plans on ordering post card 12 times over the next year. Post Card Depot receives the same number of post cards each time it orders. The carrying cost is $0.27 per post card per year. The ordering cost is $405 per order.

What is the annual carrying costs of post card inventory (round the answer to two decimal places)?

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Answer #1
Formula to calculate annual carrying costs
Annual carrying costs = Average inventory*Carrying cost per unit
Average inventory = Inventory order size/2
Calculation of annual carrying costs
Inventory order size = Post card ordered/Number of times post card ordered
Inventory order size = 3099310/12
Inventory order size        258,276 post cards
Annual carrying cost of inventory = (258276/2)*0.27
$34,867.24
The annual carrying costs of post card inventory is $34,867.24
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