Which of the Following Statements Is False

question 11

Multiple Choice

Which of the following statements is false?

• A) Optimal inventory levels involve a trade-off between carrying costs and order costs.
• B) Carrying costs include the cost of storing goods as well as the cost of capital tied up in inventory.
• C) Optimal inventory levels are lower when storage or interest costs are high and are higher when restocking costs are high.
• D) Inventory levels do not rise in direct proportion to sales. As sales increase, the optimal inventory level rises, but more than proportionately.

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Definitions:

Cost Method

An accounting method used to recognize investments in which the investor has no significant influence over the investee, recording the investment at cost and recognizing dividends as income.

Investment Income

Refers to the money earned from various types of investments, including dividends, interest, or rent.

Equity Method

An accounting approach where an investor's stake in a company is reflected by reporting the investor's proportionate share of the company's net assets and earnings.

Joint Venture

An agreement between two or more entities to combine their assets to achieve a particular goal.