Annual Holding Cost Calculator

Calculate Annual Holding Cost



Formula

To calculate the Annual Holding Cost (\(AHC\)):

\[ AHC = AIL \cdot HCU \]

Where:

What is Annual Holding Cost?

Annual Holding Cost (AHC) refers to the total cost of holding inventory over a year. It includes expenses such as storage, insurance, and opportunity costs. The formula to calculate AHC is \(AHC = AIL \cdot HCU\), where \(AIL\) is the average inventory level and \(HCU\) is the holding cost per unit per year.

Example Calculation 1

Let's assume the following values:

Using the formula:

\[ AHC = 500 \cdot 2.50 = 1250 \]

The Annual Holding Cost is $1,250.

Example Calculation 2

Let's assume the following values:

Using the formula:

\[ AHC = 1000 \cdot 3.00 = 3000 \]

The Annual Holding Cost is $3,000.