The minimum total cost of holding current assets occurs at the:
A) intersection of the carrying costs and shortage costs curves.
B) intersection of the marginal cost and average variable costs curves.
C) minimum for both the carrying costs and shortage costs curve.
D) minimum of the average variable cost curve.

Question

Quizplus · Accepted Answer

The minimum total cost of holding current assets occurs at the intersection of the carrying costs and shortage costs curves. This is because carrying costs increase with more inventory, while shortage costs decrease. The optimal point minimizes the total of these costs.

The Minimum Total Cost of Holding Current Assets Occurs at The