Which of the following would be considered a direct holding cost? (choose all that apply)Check All That ApplyRefrigeration costsRefrigeration costsDisposal cost after the unit is removed from inventoryDisposal cost after the unit is removed from inventoryPurchasing cost of a new forklift for the warehousePurchasing cost of a new forklift for the warehouseWeekly inventory quality checks for every unit in inventory
Question
Which of the following would be considered a direct holding cost? (choose all that apply)Check All That ApplyRefrigeration costsRefrigeration costsDisposal cost after the unit is removed from inventoryDisposal cost after the unit is removed from inventoryPurchasing cost of a new forklift for the warehousePurchasing cost of a new forklift for the warehouseWeekly inventory quality checks for every unit in inventory
Solution
The direct holding costs from the options provided would be:
-
Refrigeration costs: These are direct costs associated with storing items that need to be kept at a certain temperature. The cost of electricity, maintenance, and repair of refrigeration units are all part of this.
-
Weekly inventory quality checks for every unit in inventory: This is a direct cost because it is directly related to the amount of inventory held. The more inventory you have, the more it costs to check its quality.
The other two options are not considered direct holding costs:
-
Disposal cost after the unit is removed from inventory: This is a cost associated with the disposal of inventory, but it is not a holding cost. Holding costs are costs incurred to store and maintain inventory that is still on hand.
-
Purchasing cost of a new forklift for the warehouse: This is a capital expenditure, not a holding cost. It is a one-time purchase that will be used over a long period of time and is not directly related to the amount of inventory held.
Similar Questions
Which of the following is not affected by decisions about how much inventory to hold?a.ordering costsb.holding costsc.item costsd.depreciatione.stockout costs
All of the following affect holding costs except:a.insurance costb.storage costsc.obsolescence costd.setup coste.damage cost
Costs accounted for initially as inventory when produced and later as expense when sold are:Multiple choice question.direct costsindirect costsperiod costsproduct costs
Which cost is not considered to make a decision on inventory size? Group of answer choices Setup cost Order inspection cost Holding cost Materials processing cost Transportation cost
Which statement correctly describes a direct cost?
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.