For Inventory Carrying Costs, Which of the Following Statements Is

question 148

Multiple Choice

For inventory carrying costs, which of the following statements is true of the relevant opportunity cost of capital of inventory?

• A) It is the return received by investing capital in inventory rather than elsewhere.
• B) It is calculated as the per-unit costs of carrying inventory divided by the required rate of return .
• C) It is the return foregone by investing capital elsewhere rather than in inventory.
• D) It is calculated as the required rate of return multiplied by the per-unit costs of acquiring inventory including the purchase price, incoming freight, and incoming inspection.

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Definitions:

Cash Flows

The total amount of money being transferred into and out of a business, determining its operating, investing, and financing activities' liquidity.

Common Stock

A type of equity security that represents ownership in a corporation, giving shareholders voting rights and a share of the company's profits through dividends.

Inventory

Inventory consists of the goods and materials that a business holds for the purpose of resale or production.