Enter the average inventory level (# of units) and the holding cost per unit per year ($/unit/year) into the Annual Holding Cost Calculator. The calculator will evaluate and display the Annual Holding Cost. ## Annual Holding Cost Formula The following formula is used to calculate the Annual Holding Cost. AHC = AIL * HCU • Where AHC is the Annual Holding Cost ($)
• AIL is the average inventory level (# of units)
• HCU is the holding cost per unit per year ($/unit/year) To calculate annual holding costs, multiply the average inventory level by the holding cost per unit per year. ## How to Calculate Annual Holding Cost? The following example problems outline how to calculate Annual Holding Cost. Example Problem #1: 1. First, determine the average inventory level (# of units). The average inventory level (# of units) is given as 500. 2. Next, determine the holding cost per unit per year ($/unit/year). The holding cost per unit per year ($/unit/year) is provided as 25. 3. Finally, calculate the Annual Holding Cost using the equation above: AHC = AIL * HCU The values given above are inserted into the equation below: AHC = 500 * 25 = 12500 ($)

Example Problem #2:

The variables needed for this problem are provided below:

average inventory level (# of units) = 300

holding cost per unit per year ($/unit/year) = 30 Entering these values and solving gives: AHC = AIL * HCU = 9000 ($)