Which of the Following Is NOT a Benefit of Holding

question 54

Multiple Choice

Which of the following is NOT a benefit of holding inventory?

• A) minimizes the risk that the firm will not be able to obtain an input it needs for production
• B) seasonality of demand, meaning that customer purchases often do not match the most efficient production cycle, leading to a buildup of inventory in off-peak periods
• C) minimizes order cost from placing multiple orders throughout the year
• D) minimizes risks involved in spoilage and obsolescence

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Definitions:

Direct Materials Price Variance

The difference between the actual cost and standard cost of direct materials used in production, indicating how effectively a company is purchasing its raw materials.

Data Collected

Information gathered through observation, experimentation, surveys, or other methods, which can be analyzed to gain insights or make decisions.

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue contributes to covering fixed costs and generating profit.

Fixed Costs

Costs that do not vary with production or sales levels, including rent, insurance, and salaries, which remain constant regardless of business activity levels.