The cost of carrying inventory can be computed for any organization that carries
inventories, although the inventory cost model using setup costs and lot size as inputs
pertains only to manufacturers. To illustrate Equation 21.1, consider Mantener Corporation,
a service organization that does warranty work for a major producer of video
recorders. Assume that the following values apply for a part used in the repair of the
video recorders (the part is purchased from external suppliers):