What is the concept of carrying cost? How does increased carrying cost ascertain lower inventory level and vice-versa?
4 Replies
anveshgupta
(Student)
(94 Points)
Replied 21 April 2013
carrying cost is cost incurred for holding rawmaterial and i didn't understand ur next question can u elaborate it again
Pooja
(Student)
(62 Points)
Replied 21 April 2013
I think i have misinterpreted a sentence- " the lower the inventory level we want, the higher the cost to carry, the better." This is what i have found written in a few books, kindly explain what's the meaning?
2nd question is- while computing total carrying cost i don't understand what is the logic behind dividing the number of items supplied in one order by 2 & then multiplying it by carrying cost p.u p.a...what i mean is why don't we simply multiply the total number of units supplied p.a by carrying cost p.u p.a?
anveshgupta
(Student)
(94 Points)
Replied 06 December 2013
the reason behind to divide ordering quantity by 2 . here avg quantity of stock is taken since we dont hold throught out the peroid .
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