Asked by Javier Lopez on Apr 25, 2024
Verified
ABX is acquiring additional current assets. Which of the following costs will increase as a result of the acquisition of the additional current assets?
A) Carrying.
B) Shortage.
C) Order.
D) Safety.
E) Trading.
Carrying Costs
Expenses associated with holding inventory, including storage, insurance, and opportunity cost of tied-up capital.
Shortage Costs
Costs incurred from not having enough inventory on hand, including lost sales and emergency shipping expenses.
Order Costs
Expenses related to placing and receiving orders for inventory, including costs associated with ordering, shipping, and handling.
- Identify the necessary trade-offs in short-term financial planning, focusing on the balance between costs of holding inventory and the expenses associated with running into shortages.
Verified Answer
DA
Danielle Atkison6 days ago
Final Answer :
A
Explanation :
Carrying costs increase with the acquisition of additional current assets because these costs are associated with holding or maintaining inventory, such as storage, insurance, and opportunity costs.
Learning Objectives
- Identify the necessary trade-offs in short-term financial planning, focusing on the balance between costs of holding inventory and the expenses associated with running into shortages.