A Company Keeps 20 Days of Materials Inventory on Hand

question 4

Multiple Choice

A company keeps 20 days of materials inventory on hand to avoid shutdowns due to materials shortages. Carrying costs average $4,000 per day. A competitor keeps 10 days of inventory on hand, and the competitor’s carrying costs average $2,000 per day.
-Refer to the figure.Moulding the materials costs $30,000.What are the value-added costs?

• A)$80,000
• B)$40,000
• C)$30,000
• D)$20,000

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Definitions:

Domestic Resources

Resources found within a country’s borders that can be used for economic gain, such as labor, land, and raw materials.

North American Free Trade Agreement

A trade agreement between Canada, Mexico, and the United States aimed at eliminating tariffs and reducing trade barriers.

U.S. Trade

The exchange of goods and services between the United States and its trading partners, involving exports, imports, and the balance of trade dynamics.

Cheap Labor

Workforce available for employment at low wage rates, often used by companies to reduce production costs.