Your company keeps 15 days of materials inventory on hand to avoid shutdowns due to materials shortages. Carrying costs average $5,000 per day. A competitor keeps 12 days of inventory on hand, and the competitor's carrying costs average $3,000 per day. The value-added costs are
A)$0.
B)$5,000.
C)$30,000.
D)$75,000.

Question

Quizplus · Accepted Answer

The question only asks for the value-added costs, which are the costs directly associated with adding value to the product. Carrying costs are not considered value-added costs, so the answer is $0.

Your Company Keeps 15 Days of Materials Inventory on Hand