Inventory-Carrying Costs Represent Substantial Dollars for Manufacturers

question 82

Multiple Choice

Inventory-carrying costs represent substantial dollars for manufacturers. These inventory-carrying costs include storage charges, cost of capital, taxes and insurance, and depreciation and obsolescence. Carrying costs might run as high as ________ of the value of the inventory.

• A) 50 percent
• B) 30 percent
• C) 70 percent
• D) 25 percent
• E) 40 percent

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Definitions:

Labour Rate Variance

A financial metric that measures the difference between the actual cost of labor and its expected cost based on standard rates.

Performance Report

A detailed report comparing budgeted data to actual data.

Budgeted Costs

Estimated financial figures for revenues and expenses set during the budgeting process for a future period.

Labour Efficiency Variance

A measure used in cost accounting to determine the difference between the actual hours worked and the standard hours planned for a task, multiplied by the standard labor rate.