Asked by Lindsey Conrad on Jun 03, 2024
Verified
Which of the following is the best definition of shortage costs?
A) A written statement by a bank that money will be paid, provided conditions specified in the letter are met.
B) Short-term financing in which the factor purchases all of a firm's receivables and forwards the proceeds to the seller as soon as they are collected.
C) The time period between the acquisition of inventory and when cash is collected from receivables.
D) Loan negotiated with banks for day-to-day operations.
E) Costs that fall with increases in the level of investment in current assets.
Shortage Costs
Shortage costs are the expenses incurred by a business when it does not have enough inventory or resources to meet demand, including lost sales and dissatisfied customers.
Current Assets
Assets that are expected to be converted into cash, sold, or consumed within one year or within the business's operating cycle, whichever is longer.
Investment
Assigning monetary assets in hopes of achieving financial gain or income.
- Pinpoint and expound on the various costs incurred from maintaining inventory, encompassing both carrying and shortage expenses.
Verified Answer
Learning Objectives
- Pinpoint and expound on the various costs incurred from maintaining inventory, encompassing both carrying and shortage expenses.
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