Which of the Following Is Not One of the Wrong

question 57

Multiple Choice

Which of the following is not one of the wrong reasons for investing in inventory?

• A)Poor quality and material yield.
• B)Extended order-cycle times from global sourcing.
• C)Hedge against marketplace uncertainty.
• D)Specifying custom items for standard applications.
• E)Inefficient manufacturing processes.

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Definitions:

Differential Costs

Differential costs refer to the difference in total cost that will result from selecting one alternative over another in decision-making processes.

Opportunity Costs

The value of the best alternative forgone when a decision is made to pursue a particular course of action.

Mixed Costs

Mixed costs are expenses that contain both variable and fixed cost elements, changing in total with the level of activity but not directly in proportion to changes in activity level.

Sunk Costs

Costs that have already been incurred and cannot be recovered, and thus should not affect future investment or business decisions.