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A retailer purchases a snow blower for $400 and sells it for $600. The retailer incurs a 25 percent annual inventory holding cost. What is the holding cost per unit per year? $150 $100 $50 $250
Expert Answer
Annual inventory holding cost is expressed in terms of percentage cost of the item
The purchase cost of the item = $400 /unit
Inventory holding cost as percentage of purchase cost = 25% (i.e. 0.25)
Therefore, Inventory holding cost per unit per year = 0.25 x $400/unit = $100 /unit
Therefore, answer is “b.$100”
