Which of the Following Statements Is True of Relevant Inventory

question 50

Multiple Choice

Which of the following statements is true of relevant inventory costs?

• A) The salaries paid to clerks, stock keepers, and materials handlers are relevant carrying costs if they are unaffected by changes in inventory levels.
• B) The costs of expediting an order from a supplier are relevant incremental costs of stockouts.
• C) Warehouse rent, warehouse workers' salaries and costs of insurance, that change with the quantity of inventory held are irrelevant carrying costs.
• D) Those ordering costs that change with the number of orders placed are irrelevant ordering costs.

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Definitions:

Service Firms

Companies that provide intangible products or services to consumers or other businesses rather than physical goods.

Contribution Margin Ratio

The percentage of each sales dollar that is available to cover the fixed costs and provide an operating income. Also called profit-volume ratio.

Contribution Margin

The income left over after subtracting variable expenses, which is utilized to pay for fixed costs and create earnings.

Sales

Sales refer to the transactions where goods or services are exchanged for money, contributing to a company's revenue.