Which of the Following Is Not Considered a Carrying Cost

question 301

Multiple Choice

Which of the following is not considered a carrying cost for the firm when it grants credit?

• A) The required return on receivables.
• B) Losses from bad debts.
• C) The cost of managing credit.
• D) The cost of managing credit collections.
• E) Cost of new analyzing potential new suppliers.

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Definitions:

Profit Center

A business unit or division that is responsible for generating its own revenue and profit, with its financial performance being tracked separately.

Investment Center

A segment or area of a business responsible for its own revenue, expenses, and assets, and its performance is measured by its return on investment.

Fixed Expenses

These are costs that do not change with the level of production or sales, such as rent, salaries, and insurance.

Return On Investment

A measure used to evaluate the efficiency of an investment or compare the efficiencies of several different investments.