CAF-5 · Chapter 16 · Question 2 of 10
Which of the following costs is typically classified as an inventory "holding cost" (or carrying cost)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) The opportunity cost of capital tied up in the inventory.
Explanation
Holding costs (or carrying costs) include expenses associated with storing inventory, such as warehouse rent, insurance, deterioration, and importantly, the opportunity cost (financing cost or interest) of the capital that is tied up in the stock.
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