Holding High Levels of Inventory Result in ____ Inventory Carrying

question 18

Multiple Choice

Holding high levels of inventory result in ____ inventory carrying costs and ____ stockout costs.

• A)High; high
• B)High; low
• C)Low; high
• D)Low; low

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Definitions:

Cost-to-retail Ratio

A method used to estimate the value of ending inventory and cost of goods sold by comparing the cost of goods available for sale to the retail price of the goods.

Declining Prices

A situation where the prices of goods or assets are decreasing over time, often leading to negative impacts on economies or markets.

Retail Inventory Method

A method of valuing inventory based on the retail price of goods, used primarily in retail sectors for inventory estimation.

Average Cost Retail Inventory Method

An inventory costing method that values inventory at the average cost of goods available for sale during the period, used to estimate the inventory's cost and ending inventory value.