Order-processing costs must be compared with inventory-carrying costs because the larger the average stock carried, the higher the inventory-carrying costs.

Question

Quizplus · Accepted Answer

This is true since inventory-carrying costs are directly proportional to the amount of inventory held. As the average stock increases, so do the costs associated with storing and managing that inventory. Therefore, it is important to compare these costs with order-processing costs to determine the optimal level of inventory to carry.

Order-Processing Costs Must Be Compared with Inventory-Carrying Costs Because the Larger