A company has 5 days of finished goods inventory on hand to avoid stockouts. The carrying costs of the inventory average $2,500 per day. The non-value-added costs are
A)$-0-.
B)500.
C)$2,500.
D)$12,500.

Question

Quizplus · Accepted Answer

Non-value-added costs are those that do not add to the value of the product but are incurred by the company. In this case, the carrying costs of the inventory, which amount to $2,500 per day for 5 days, are considered non-value-added costs. Therefore, the total non-value-added costs are $2,500 * 5 = $12,500.

A Company Has 5 Days of Finished Goods Inventory on Hand