Inventory carrying costs equal the ________.
A) opportunity costs of the investment tied up in inventory and the cost of manufacturing of goods
B) costs of storage only
C) opportunity costs of the investment tied up in inventory and the relevant costs of storage
D) historical costs and the relevant costs of storage

Question

Quizplus · Accepted Answer

Inventory carrying costs include both the opportunity costs of the investment tied up in inventory (i.e. the cost of not being able to invest that money in other profitable opportunities) and the relevant costs of storage (such as rent, utilities, insurance, and security). Option A is partially correct but does not include the relevant storage costs, while option B and D are incorrect as they do not consider opportunity costs.

Inventory Carrying Costs Equal the ________