A bicycle manufacturer purchases bicycle seats from an outside supplier for $22 each. The manufacturer’s inventory of seats turns over 0.9 times per month, and the manufacturer has an annual inventory holding cost of 32 percent. What is the inventory holding cost (in S) for a bicycle seat?

$0.65

Explanation:

The inventory holding cost (in S) for a bicycle seat is 32% of the Average Inventory Value. .that would mean that we need to calculate the Average Inventory Value first.

We can do that using the Inventory Turnover formula which is,

Inventory Turnover Ratio = Cost of goods sold / Average inventory value

Making Average inventory value the subject we have,

Average inventory value = Cost of goods sold / Inventory turnover ratio

Since we know the Cost of Goods sold is $22 and the Inventory Turnover is 0.9 times PER MONTH which translates to 10.8 PER YEAR (0.9*12 months) we can then calculate.

Putting in the figures we have,

Average inventory value = Cost of goods sold / Inventory turnover ratio

= 22/10.8

= 2.03703703704

= $2.04

Annual unit inventory holding cost = 32% of Average inventory value

= 0.32 * 2.04

= 0.6528

= $0.65 (2 dp)

$0.65 is the inventory holding cost for a bicycle seat

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.