[lala001]

I just wanna ask about this matter:
The formula given for the carrying cost is Cc=Q/2 [C I]
Cc = carrying cost per year
Q= order quantity for materials
C= delivered unit cost
I= inventory carrying cost for the material (expressed as percentage of inv. value)

Example:
The production manager disagreed with the purchasing department about the volume of materials to purchase per order. He wants lower volume of 50,000 units against 80,000 units. Carrying cost is 20% of the inventory value. Computed costs for these two sets of volume are as follows:

50,000 units:
Cc = 50,000 / 2 [.10 x .2]
= 25,000 x .02
= 500

QUESTION: WHERE DOES THE “.10” COME FROM?
Please help me with this one 🙂

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