Question

which reason for holding inventory is exemplified when a firm builds up stock because they anticipate rising profit levels in the future

Answer 1

The expenses incurred for keeping goods or inventory in a warehouse are known as inventory holding costs.

What is inventory holding cost?

• The expenses incurred for keeping goods or inventory in a warehouse are known as inventory holding costs.
• Inventory that is kept on hand is a liability that reduces profit margins and raises operating costs for firms.
• Inventory holding expenses include rent for the facility, security fees, depreciation costs, and insurance.
• To reduce stock-out costs, merchandise is kept on hand.
• To ensure that no consumer leaves empty-handed, all businesses must forecast the demand for their products and maintain inventories of raw materials, finished goods, work-in-progress, and consumables.
• Within a single supply chain, inventory holding costs are computed as a portion of the overall inventory costs.
• Storage, insurance, labor, transportation, depreciation, shrinkage of the inventory, spoilage of the inventory, obsolescence, and opportunity costs are some of the costs.

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