# From a marginal analysis perspective, what is the inventory carry cost for Andrews if the company carries one additional unit of Axe

From a marginal analysis perspective, what is the inventory carry cost for Andrews if the company carries one additional unit of Axe in inventory at the end

Carrying cost or carrying cost of inventory is a term used in marketing that refers to holding inventory and the entire cost associated with doing so. The warehouse costs to hold the inventory, all costs associated with the items being held that range from salaries for employees, rent, opportunity costs for not selling the items are all considered when talking about carrying costs of holding inventory.

Andrew’s company will have an inventory carry cost of \$1.20 if it carries one additional unit of Able in inventory at the end. This is assuming that the company’s previous inventory is lower than the current one. This means that a difference or variance in the inventory is found to be \$1.20.

Demand is created through meeting customer buying criteria, credit terms, awareness (promotion) and accessibility (distribution). According to the Thrift segment’s customers, which of these products was the most competitive at the end of last year Solution – As the Data does not give information of credit terms we are taking the other three factors buying criteria, awareness (promotion) and accessibility (distribution) in consideration with 1/3 Weightage to each of them and for buying criteria already the weightage is given – Here what we do is find the Variation from the Ideal in Percentages and after giving weightage to the variations we find lowest variation percentage which is the most competitive Lets find the Variation in the buying Criteria first for which we have the below details given Thrift Customer Buying Criteria Expectations Importance 1. Price \$14.00 – 26.00 55% 2. Reliability MTBF 14000-20000 20% 3. Ideal Position Pfmn 6.5 Size 13.7 15% 4. Age Ideal Age = 3.0 10% So below is the variation calculation for Buying Criteria and it shows cake is most competitive however we need to see how other two factors perform too Pfmn Coord Size Coord List Price MTBF Age Dec.31 A Actual Cedar 7 13.2 19 17000 2.56 A Actual Cake 6.8 13.4 \$19.00 17000 2.76 A Actual Adam 6 14.2 \$20.00 14000 3.46 A Actual Dell 5.7 14.5 \$26.00 20000 5.11 V Variation Cedar 7.7% 3.6% 0 0 14.7% V Variation Cake 4.6% 2.2% 0 0 8.0% V Variation Adam 7.7% 3.6% 0 0 15.3% V Variation Dell 12.3% 5.8%

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Using marginal analysis, the company’s inventory carry cost is \$1.20. This is because if we assume that this is the difference between the previous and current inventory count, converted to cost. The previous inventory should have a lower cost compared to the current inventory.