INVENTORY MANAGEMENT – ANNUAL HOLDING COSTS

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July 16, 2017 at 5:30 pm #396375
khawarbutt
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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
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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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