A Company Keeps 20 Days of Materials Inventory on Hand

question 88

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.What are the non-value-added costs for the company?

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

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Definitions:

Public Sector

The part of the economy that is controlled by the government, encompassing public services and enterprises.

Collective Bargaining Agreement

A written contract negotiated through collective bargaining by employees, through their representatives, and their employer, dictating the terms of employment.

Competitive Labor Market

A labor market characterized by numerous employers and job seekers, where wages are determined by supply and demand for labor.

Unionization

The process by which workers join together to form a union in order to collectively bargain with their employer regarding wages, benefits, and working conditions.