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INVENTORY MANAGEMENT – ANNUAL HOLDING COSTS

Forums › Ask CIMA Tutor Forums › Ask CIMA F1 Tutor Forums › INVENTORY MANAGEMENT – ANNUAL HOLDING COSTS

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  • July 16, 2017 at 5:30 pm #396375
    khawarbutt
    Participant
    • Topics: 14
    • Replies: 6
    • ☆

    Hi,
    Why do we use average inventory i.e. Q/2 to calculate annual cost of holding inventory.

    July 17, 2017 at 9:49 pm #397198
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7082
    • ☆☆☆☆☆

    Hi,

    Because inventory will fluctuate during the year so we cannot just use the year-end value, so a simple average is used.

    Thanks

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