Too Many Products on Hand Means That Too Much Money

question 20

True/False

Too many products on hand means that too much money is tied up in inventory and it increases the risk of obsolescence.

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Definitions:

Testing Prototype

The process of evaluating the initial example of a product to assess its functionality, design, and performance before mass production.

Batch-Level Activity

Costs or activities that are incurred every time a batch is produced, regardless of the size of the batch; part of activity-based costing.

Traditional Costing

A costing method that allocates factory overhead to products based on volume-related measures, such as labor hours or machine hours.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate estimated manufacturing overhead costs to individual units of product based on a chosen activity base.