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A Company Keeps 20 Days of Materials Inventory on Hand

question 79

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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. The value-added costs are


Definitions:

Price

The amount of money required to purchase a particular good or service.

Sales

The activity or business of selling products or services.

Costs

The costs associated with the creation of goods or services, covering materials, workforce, and indirect expenses.

Return on Investment

A measure used to evaluate the efficiency or profitability of an investment, calculated by dividing the profit gained from the investment by its cost.

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