In Making Any Decision That Affects Inventory Size, Which of the Following

question 71

Multiple Choice

In making any decision that affects inventory size, which of the following costs do not need to be considered?

• A) Holding costs
• B) Setup costs
• C) Ordering costs
• D) Fixed costs
• E) Shortage costs

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Definitions:

Average Cost

refers to the total cost of production divided by the number of units produced, also known as unit cost.

Cost Of Goods Sold

Cost of goods sold (COGS) is the direct cost attributed to the production of the goods sold by a company, including material and labor costs, but excluding indirect expenses.

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated by adding new purchases to beginning inventory and subtracting cost of goods sold.

Perpetual Inventory Account

An accounting method that records inventory purchases and sales in real time, providing a continuously updated inventory balance.