Inventory holding costs typically include:
A) clerical costs of purchase-order preparation.
B) costs of deterioration, theft, or spoilage.
C) costs associated with lost sales to customers.
D) forgone interest on money tied up in inventory.
E) both costs of deterioration, theft, or spoilage and forgone interest on money tied up in inventory.

Question

Quizplus · Accepted Answer

Inventory holding costs include various expenses associated with holding inventory, such as costs of deterioration, theft, or spoilage (B), and forgone interest on the money tied up in inventory (D). These costs represent the financial and material losses a business incurs over time by storing inventory, as well as the opportunity cost of the capital invested in the inventory.

Inventory Holding Costs Typically Include