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Question

Brent Custom Products pays 7.6% annual interest on one-half of its $3,000,000 annual inventory value. It also pays 0.65 % personal property tax on the total value of inventory . Other carrying costs include$26,000 insurance , $51,000 in labor costs, and$19,000 in overhead costs. What is the carrying cost per $1 of annual inventory , to the nearest tenth of a cent?

Solution

VerifiedStep 1

1 of 5$\$1,500,000 \times 7.6\% \times 1=\$114,000$

The interest is the product of the principal, interest rate and time expressed in years.

The interest needs to be paid on one-half of $\$3,000,000$, thus the principle is $\$1,500,000$.

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