2Expressing the total cost on an annual basis usually is convenient (although not necessary). Any time horizon can be selected as long as D and H cover the same time period. If the total cost is calculated on a monthly basis, D must be monthly demand and H must be the cost of holding a unit for 1 month 3The number of orders actually placed in any year is always a whole number, although the formula allows for the use of fractional values. However, rounding is not needed because what is being calculated is an average of multiple years. Such averages often are nonintegers.