Enter the average inventory level (# of units) and the holding cost per unit per year ($/unit/year) into the Annual Holding Cost Calculator. The calculator will evaluate and display the Annual Holding Cost.

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## Annual Holding Cost Formula

The following formula is used to calculate the Annual Holding Cost.

AHC = AIL * HCU

- Where AHC is the Annual Holding Cost ($)
- AIL is the average inventory level (# of units)
- HCU is the holding cost per unit per year ($/unit/year)

To calculate annual holding costs, multiply the average inventory level by the holding cost per unit per year.

## How to Calculate Annual Holding Cost?

The following example problems outline how to calculate Annual Holding Cost.

Example Problem #1:

- First, determine the average inventory level (# of units). The average inventory level (# of units) is given as 500.
- Next, determine the holding cost per unit per year ($/unit/year). The holding cost per unit per year ($/unit/year) is provided as 25.
- Finally, calculate the Annual Holding Cost using the equation above:

AHC = AIL * HCU

The values given above are inserted into the equation below:

AHC = 500 * 25 = 12500 ($)

Example Problem #2:** **

The variables needed for this problem are provided below:

average inventory level (# of units) = 300

holding cost per unit per year ($/unit/year) = 30

Entering these values and solving gives:

AHC = AIL * HCU = 9000 ($)