5. autographed sports cards estimates the annual cost of carrying its inventory to be 20 percent of the…

5. autographed sports cards estimates the annual cost of carrying its inventory to be 20 percent of the value of its inventory. the company normally carries an inventory of $418,000, but to save money it has reduced the value of its inventory to $350,000. how much less is the cost of carrying the inventory?

5. autographed sports cards estimates the annual cost of carrying its inventory to be 20 percent of the value of its inventory. the company normally carries an inventory of $418,000, but to save money it has reduced the value of its inventory to $350,000. how much less is the cost of carrying the inventory?

Answer

Explanation:

Step1: Calculate initial carrying - cost

The initial carrying - cost is 20% of the initial inventory value. The initial inventory value is $418000. So the initial carrying - cost $C_1$ is $C_1 = 0.2\times418000$. $C_1=0.2\times418000 = 83600$.

Step2: Calculate new carrying - cost

The new inventory value is $350000$. The new carrying - cost $C_2$ is 20% of the new inventory value. So $C_2 = 0.2\times350000$. $C_2=0.2\times350000 = 70000$.

Step3: Calculate the difference

The difference $\Delta C$ in carrying costs is $C_1 - C_2$. $\Delta C=83600 - 70000=13600$.

Answer:

$13600$