The art store can

The art store can Also read Complete understanding of moving averages in inventory management Example An art supply store sells three different products paint brushes easels and canvases. Over the past year the business stock units of each product bringing its total inventory to units. This business wants to calculate the holding cost of their inventory for the past year. First the business checks its records and finds the following Annual inventory value Holding costs rent utilities and insurance Employee costs employee wages Next businesses must calculate their opportunity costs or in other words the amount of money they could make if they pursu alternative scenarios.

At the end of the year

The business sells all units of  each Australia Phone Number List product generating revenue of but even though the easels barely sold out in time the canvases their most popular product were already book for next year. If this business optimiz their inventory to carry brushes easels and canvases they could make . Therefore the opportunity cost of an art shop is calculat as follows Opportunity cost Return from unselect scenario Return from select scenario Opportunity cost Opportunity cost Then depreciation must be calculat. The art store determin that last year their inventory cost to create and had a shelf life of years.

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The costs that can be

Sav at the end of the years are . With Australia Email List this information they calculate inventory shrinkage like this Depreciation Cost of manufacturing goods Salvage value Age of inventory Depreciation Depreciation Depreciation Finally by having all the necessary data calculate its holding costs for last year Holding cost storage costs Employee salaries Opportunity costs Depreciation costs Total annual inventory value Holding cost Holding cost atau . In this case the cost of setting up an art shop is very high. Typically inventory holding costs should only be around of the annual value of your inventory.

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