![]() Lastly, opportunity cost is the cost of missing out on other profitable opportunities by investing your money in inventory instead of other assets or ventures it can be estimated by multiplying your average inventory value by the annual interest rate or return rate that you could earn by investing your money elsewhere. Obsolescence cost is the cost of losing sales or having to discount your inventory due to changes in customer preferences, fashion trends, or market conditions it can be estimated by multiplying your average inventory value by the percentage of your inventory that becomes obsolete or unsalable each year. ![]() Depreciation cost is the cost of losing value in your inventory due to wear and tear, aging, or technological obsolescence it can be estimated by multiplying your average inventory value by the annual depreciation rate for your product type and industry. If its not provided directly, you can solve for it by dividing the cost of goods sold by the average. Taxes cost can be estimated by multiplying your average inventory value by the applicable tax rate in your area. The next step is to determine the inventory turnover rate. To calculate insurance cost, you can multiply your average inventory value by the average insurance rate for your product category and location. To calculate storage cost, you can multiply the total square footage of your storage space by the average cost per square foot in your area and include any additional expenses related to storage. ![]() ![]() Common components include storage cost, insurance cost, taxes cost, depreciation cost, obsolescence cost, and opportunity cost. In order to calculate the individual costs of inventory carrying cost, you must identify and measure each component that affects your inventory holding and management. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |