The formula for total carrying cost is
A)number of orders per year ´ cost of placing an order.
B)number of orders per year/cost of placing an order.
C)average number of units in inventory ´ cost of carrying one unit in inventory.
D)average number of units in inventory/cost of carrying one unit in inventory.
E)ordering cost + carrying cost.

Question

Quizplus · Accepted Answer

Total carrying cost is calculated by multiplying the average number of units in inventory by the cost of carrying one unit in inventory. Option A is the formula for ordering cost, not carrying cost. Option B is an incorrect formula. Option D is the inverse of the correct formula for carrying cost. Option E is a combination of ordering cost and carrying cost, but it does not represent the total carrying cost.

The Formula for Total Carrying Cost Is