Among different types of costs associated with inventory, the opportunity cost of the investment tied up in inventory belongs to which of the following?

Among different types of costs associated with inventory, the opportunity cost of the investment tied up in inventory belongs to which of the following?
A . Acquisition costs
B . Purchase price
C . Holding costs
D . Costs of stockouts

View Answer

Answer: C

Explanation:

Direct and indirect costs of holding inventory include the following:

– Acquisition costs

– Holding costs: There are 2 different types of holding costs: costs related to the value of the goods (including opportunity costs, costs of insurance, losses due to product deterioration, etc) and costs related to the physical characteristics of this inventory.

– Costs of stockouts

Reference: CIPS study guide page 100-101

LO 2, AC 2.2