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Total Inventory Cost Formula

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Total inventory cost is the total cost associated with ordering and carrying inventory, not including the actual cost of the inventory itself. Check FAQs

TIC = C h \cdot (\frac{Q}{2}) + Cf \cdot (\frac{Demand}{Q})

TIC - Total Inventory Cost?C_h - Carrying cost per unit per year?Q - Quantity of Each Order?Cf - Fixed cost per order?Demand - Demand in Units Per Year?

Total Inventory Cost Example

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With units

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Here is how the Total Inventory Cost equation looks like with Values.

Here is how the Total Inventory Cost equation looks like with Units.

Here is how the Total Inventory Cost equation looks like.

20087.5 = 3.5 \cdot (\frac{50}{2}) + 500 \cdot (\frac{2000}{50})

20087.5 = 3.5 \cdot (\frac{50}{2}) + 500 \cdot (\frac{2000}{50})

20087.5 = 3.5 \cdot (\frac{50}{2}) + 500 \cdot (\frac{2000}{50})

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Total Inventory Cost Solution

Follow our step by step solution on how to calculate Total Inventory Cost?

FIRST Step Consider the formula

TIC = C h \cdot (\frac{Q}{2}) + Cf \cdot (\frac{Demand}{Q})

Next Step Substitute values of Variables

∴

TIC = 3.5 \cdot (\frac{50}{2}) + 500 \cdot (\frac{2000}{50})

Next Step Prepare to Evaluate

∴

TIC = 3.5 \cdot (\frac{50}{2}) + 500 \cdot (\frac{2000}{50})

LAST Step Evaluate

∴

TIC = 20087.5

Total Inventory Cost Formula Elements

Variables

Total Inventory Cost

Total inventory cost is the total cost associated with ordering and carrying inventory, not including the actual cost of the inventory itself.

Symbol: TIC

Measurement: NAUnit: Unitless

Note: Value can be positive or negative.

Formulas to find Total Inventory Cost

Carrying cost per unit per year

Carrying cost per unit per year refers to the total cost of holding inventory for a unit per year.

Symbol: C_h

Measurement: NAUnit: Unitless

Note: Value can be positive or negative.

Formulas to find Carrying cost per unit per year

Quantity of Each Order

The Quantity of Each Order refers to the number of units or items that are purchased or acquired in a single transaction or order.

Symbol: Q

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Quantity of Each Order

Fixed cost per order

Fixed costs per order are the cost that does not change with an increase or decrease in the amount of goods or services produced or sold.

Symbol: Cf

Measurement: NAUnit: Unitless

Note: Value can be positive or negative.

Formulas to find Fixed cost per order

Demand in Units Per Year

Demand in Units Per Year represents the total demands of the unit per year.

Symbol: Demand

Measurement: NAUnit: Unitless

Note: Value can be positive or negative.

Formulas to find Demand in Units Per Year

Other formulas in Important Formulas of Business category

Go Break-Even Point

BEP = \frac{FC}{CM}

Go Return on Capital Employed

ROCE = (\frac{EBIT}{TA - CL}) \cdot 100

Go Solvency Ratio

SR = \frac{SF \cdot 100}{TA}

Go Economic Order Quantity

EOQ = (\frac{2 \cdot Cf \cdot Demand}{C h}) \cdot (\frac{1}{2})

How to Evaluate Total Inventory Cost?

Total Inventory Cost evaluator uses Total Inventory Cost = Carrying cost per unit per year*(Quantity of Each Order/2)+Fixed cost per order*(Demand in Units Per Year/Quantity of Each Order) to evaluate the Total Inventory Cost, Total inventory cost is the total cost associated with ordering and carrying inventory, not including the actual cost of the inventory itself. Total Inventory Cost is denoted by TIC symbol.

How to evaluate Total Inventory Cost using this online evaluator? To use this online evaluator for Total Inventory Cost, enter Carrying cost per unit per year (C_h), Quantity of Each Order (Q), Fixed cost per order (Cf) & Demand in Units Per Year (Demand) and hit the calculate button.

FAQs on Total Inventory Cost

What is the formula to find Total Inventory Cost?

The formula of Total Inventory Cost is expressed as Total Inventory Cost = Carrying cost per unit per year*(Quantity of Each Order/2)+Fixed cost per order*(Demand in Units Per Year/Quantity of Each Order). Here is an example- 20087.5 = 3.5*(50/2)+500*(2000/50).

How to calculate Total Inventory Cost?

With Carrying cost per unit per year (C_h), Quantity of Each Order (Q), Fixed cost per order (Cf) & Demand in Units Per Year (Demand) we can find Total Inventory Cost using the formula - Total Inventory Cost = Carrying cost per unit per year*(Quantity of Each Order/2)+Fixed cost per order*(Demand in Units Per Year/Quantity of Each Order).

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Total Inventory Cost Formula

Total Inventory Cost Example

Total Inventory Cost Solution

Total Inventory Cost Formula Elements

Other formulas in Important Formulas of Business category

How to Evaluate Total Inventory Cost?

FAQs on Total Inventory Cost

Variable Name